Built Environment: Opportunities for investors to help Britain build better homes
Demand for affordable housing is increasing, supply of that housing has stalled. Technology offers the opportunity to transform the development, construction and occupation of UK housing stock.
Construction has certainly been through a torrid time. However, the macro drivers are positive, and we expect accelerated growth by the end of 2024 as the market enters an ‘expansion phase’.
That said, recovery will be uneven with the development of residential homeownership constrained by higher mortgage rates and availability of development land, especially outside of urban areas. Developers are instead eyeing up the build-to-rent sector with major build-to-rent developments in the early stages of the planning pipeline.
Technology can help. In KPMG’s 2023 Global Construction Survey: Familiar challenges – new approaches; 81% of E&C are now adopting mobile platforms, 43% are using robotic process automation (RPA) and 40% adopting AI – although many are in the early stages.
One technology that is attracting the interest of UK investors is geospatial and location data tools. These enable surveyors / developers / construction workers to enhance decision making, improve project efficiency, and provide valuable insights on site. This improves efficiency and accuracy of data collection, project planning, design, and execution of projects.
Energy efficient homes
I recently published an article on how private equity can help contribute to the UK goal of net zero, smart energy management in homes is part of the solution.
Various businesses working closely with utilities are now reaching size and maturity and offer interesting (and rewarding) opportunities for investors who are also keen to meet ESG ambitions. Service offerings range from energy efficiency and retrofit services to integrated infrastructure offerings for Power, Gas, and Renewable energy. The market is highly fragmented with plenty of space to grow organically or inorganically through an M&A strategy.
We’ve seen a lot of focussed activity in fire safety services over the last year, please read our article here. There is the potential to think more holistically about fire safety within the broader BIM, facilities management and TICC sectors, with their various drivers coming into play such as advances in technology and shifts to preventative maintenance.
Questions for the investor
Here are some key issues and questions facing mid-market PE considering investment in the sector;
- What segments does the underlying tech focus on (e.g. residential, commercial, infrastructure, back-office or on-site)? And what functional elements? Is it pro-cyclical (e.g. with a focus on project management/ERP for new-build), or counter-cyclical (e.g. lifetime building or tenant/revenue management, ongoing certification).
- What size of end-users does the tech focus on, and how developed are the sales channels for these end-users? How does the company benefit from, and overcome the inertia in tech adoption/switching in the sector? Is the sales force tech-led or construction-led?
- What underlying platforms are used for the tech, and how do these tie-in with software and systems currently used by construction firms?
- How strong are relationships with underlying platform providers, what lead generation do these relationships provide, can the target company position itself as a key construction specialist with the platform provider?
- How practical are proposed expansion plans (e.g. by geography, sub-sector, size of end-user, functionality)? How developed is the tech roadmap, and how does this map onto likely future requirements?
Deals we’ve worked on recently
Speak to a member of the team about opportunities in the Built Environment.
Brandon Matthews, Senior ConsultantEmail Brandon