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Is the home construction market focused mainly on the rental sector?

Build-to-Rent (BtR) properties are springing up all over the UK, from London to Birmingham and Manchester. Often found in urban settings, these apartment blocks are constructed specifically for renting – not for purchase by occupants or buy-to-rent – and ‘institutionally owned’.

Their growth is driven by the rising cost of home ownership and the increasing proportion of young people who no longer see that as a critical life goal.  

A report from online estate agent Zoopla highlights that 42% of adults between 18 and 39 who don’t own a home now say they’re no longer considering a house purchase. This includes 38% of those earning £60,000 per year.

The BtR market is filling this gap by targeting renters prepared to pay higher rents for added facilities. The accommodation can include high-quality rented furnishings, in-house gyms, free Wi-Fi, and areas for social mixing and third space working. The Build-to-Rent market is framing ‘mortgage-free’ as a lifestyle choice. 

Developers will look for technologies that can deliver energy efficient cooling and good IAQ

Karen Fletcher Rocket Karen Fletcher Editor The Sectorscope

Ripe for new technologies

BtR is also an interesting market for construction and building services. Although the buildings are ‘dwellings’, their scale requires commercial-scale approaches to construction methods and HVAC provision.

They are ripe for the use of technologies such as heat recovery, ambient heat loops and even air conditioning. Measuring and monitoring energy use is also crucial for accurate billing.

Modern methods of construction (MMC) have been widely applied to BtR projects. The approach, which uses offsite manufacturing to produce ready-to-fit modules allows BtR clients to get a building up and running quickly. MMC also ensures fewer fitting errors on-site, reducing call-backs and delays in opening new buildings.

In addition, metering and monitoring at scale are essential for this sector as corporate landlords provide apartment-level billing while also tracking overall building use and energy consumption.

Controls also help to support building maintenance and reduce the down-time of critical systems such as heating and hot water.

Sustainable construction

The scale of BtR schemes (they must provide at least 50 homes to be categorised as such) also means that they can benefit from sustainable construction and operation approaches.

BtR developers are also interested in pursuing ESG goals, many aiming for high EPC ratings of A and B, for example.

What’s more, unlike a build-to-sell product, the landlord pays for some operational costs such as energy and water use in common areas – so efficient operation benefits the bottom line.

All electric sites

Most new BtR schemes are all-electric, allowing for faster connections and easier installations. This has seen developers specify PV panels and air source heat pumps for buildings, although there is room for greater adoption of heat pumps across this market.  

As dwellings, BtR schemes are subject to Part L (2022) and its requirement for a 31% reduction in carbon emissions against the previous Regulatory standards. This has been a further incentive for developers to focus on the use of low-carbon technologies.

Future trends likely to impact BtR schemes, particularly in cities, are a growing concern around indoor air quality (IAQ) and the prevention of overheating.

Dwellings are covered by Part O of the Building Regulations, meaning that BtR schemes constructed since 2022 must meet the requirements for mitigating overheating – especially if they’re in London, which is currently the dominant market for these buildings.

Developers will likely be looking for technologies that can deliver energy efficient cooling and good IAQ.

Further expansion

Build-to-Rent is now well-established in the UK and is set to expand in cities and further afield. Suburban Build-to-Rent (SBtR) is already being discussed with low- to mid-rise developments in towns on the edge of cities.

With UK renters in the 35 – 64 age bracket almost doubling in the last ten years, families and older occupants are a key market.

The domestic construction sector has seen a pause in housebuilding as mortgage interest rates rise.

However, the BtR market is less affected, and corporate property investors are spending significantly in this sector. This could benefit both domestic and commercial contractors.

Karen Fletcher, Editor The Sectorscope