The Role of the Build to Rent Market in a shifting ESG focus

The Future Property 2 report by Investec, published in June 2024, reveals a notable shift in the UK’s real estate sector. The ESG (Environmental, Social, and Governance) framework, which has seen a predominant focus on environmental factors, now swings towards a growing emphasis on social considerations. This change is especially prominent in the residential-to-rent sectors, where developers and investors recognise the multifaceted benefits of integrating social value into their projects. According to the report, 42% of respondents consider social impact the most important ESG factor in real estate development, compared to 16% who prioritise carbon footprint reduction.

The shift to social considerations

This shift is driven by the high costs of environmental measures and the increasing importance of creating social value projects that support communities while also generating financial returns. While reducing the environmental impact remains vital, it is costly. However, 81% of respondents see a link between sustainable development and financial gain, and 88% agree that the EPC rating of a property is a key investment criterion. Nonetheless, the social aspect of ESG remains the priority.

Incorporating social value in Build to Rent developments

Build to Rent (BTR) developments are uniquely positioned to embrace this shift by integrating social value into their designs. These developments can create spaces that positively impact the communities they serve, addressing various needs while also achieving financial returns. One effective approach is incorporating mixed-use elements within residential projects. Mixed-use developments, such as Creekside Wharf in Greenwich, demonstrate how combining residential, commercial, and community spaces can create vibrant, inclusive communities. These projects offer a range of services and amenities within easy reach of residents, enhancing their quality of life and supporting local economies by creating jobs and supporting local businesses.

Incorporating community-centred design into BTR projects is another important strategy. Designing buildings with communal areas and facilities for community use encourages social interaction and strengthens community ties. Ensuring proximity to essential services, such as schools, healthcare facilities, and retail spaces, improves residents’ quality of life and makes developments more appealing. Integrating green spaces, such as parks, gardens, and rooftop terraces, into residential projects provides residents with areas for relaxation and recreation, contributing to their well-being and promoting environmental sustainability.

Incorporating inclusivity in Build to Rent developments

As the real estate sector increasingly emphasises social value, inclusivity in design is emerging as a fundamental pillar of consideration rather than a supplementary feature. Cowan Architects is deeply committed to optimising spaces for health and wellbeing, and promoting healthy lifestyles through thoughtful design. The company’s expertise in designing for accessibility and disability, further strengthened by its Expert Witness team, enables them to create inclusive and accessible Build to Rent spaces.

It is essential for architects and developers to demonstrate strong capability in creating accessible and inclusive spaces to support the growing trend towards embedding social value in Build to Rent (BTR) developments. This approach not only enhances residents’ quality of life but also aligns with the financial benefits of socially responsible investments. As the industry evolves, prioritising inclusivity in design remains crucial for developing successful and sustainable BTR projects.

Financial benefits of social investments

The report highlights the financial benefits of focusing on social value. Developers increasingly recognise that socially responsible projects can generate financial returns due to increased demand, improved reputation, and higher property values. BTR developments prioritising social considerations often experience higher tenant retention, lower vacancy periods, and increased rental value. An overwhelming 96% of investors are currently investing in the residential-for-rent sector, demonstrating the strong financial opportunities associated with these initiatives.

The future

Overall, the shift from environmental to social considerations in the ESG focus presents significant opportunities for the Build to Rent sector. BTR has a crucial role to play in designing buildings and spaces that support communities while also delivering financial returns. Developers must rise to this challenge and create innovative solutions that meet the needs of both communities and investors. By doing so, they can ensure that their projects not only contribute to social gain but also achieve long-term financial benefits.