Construction cost drivers

Key factors that influence capital construction cost of Build to Rent projects in the UK

This article sets out a number of key factors that tend to influence the capital construction cost of Build to Rent projects in the UK (relating to a £/ft² rather than £/unit basis).   
The intention here is to provide an overview of key aspects that may be considered an influence to construction cost. Like all real estate development projects, the capital cost of construction for Build to Rent projects is a key area for developers and investors alike and should be considered in the context of market conditions, target customers, delivery models, exit strategy, risk exposure and returns.  
Specialist and specific advice should always be sought as every project is different, and factors and their impacts can vary significantly depending on the context involved.  
This content does not constitute advice and is intended only for information.  

Timing and wider market issues

Market conditions  

Many organisations produce periodic construction market intelligence reports that provide commentary on current construction trading conditions. These will typically outline construction price inflation dynamics which may have an impact on the cost of a Build to Rent project. Additionally, other events impacting construction prices and costs will typically be covered, for example challenges with logistics and materials supply. You can review these reports and seek further advice from suitable consultants in order to use the insight for the benefit of your project.  

Find out specifics  

Always engage consultants who have access to extensive data in the UK’s Build to Rent sector across the aforementioned areas so it can be applied specifically to your project.    

Site selection and appraisal  

Geographical location

The location of a project can influence the cost of its construction. This location factor is independent of geographical variations in target market and specification and is more related to demand and supply dynamics including construction demand, labour, plant, logistics and materials which can vary by region, resulting in different pricing and cost dynamics. For example, some regions may experience higher levels of construction demand than others, relative to the pool of construction supply chain and the labour available to deliver, leading to higher cost.   


Local site conditions typically impact the cost of construction. Infrastructure requirements, ground conditions, potential contamination, existing structures, adjoining property uses and party walls, matters associated with rights of light and acoustics are all examples that can have an impact. This is particularly relevant to Build to Rent as many BTR projects are developed in urban areas.   


We have also touched upon this below, under procurement, but there is a general point that the higher the risk profile of a Build to Rent project, the more significant cost impact this risk will have in how delivery of the project is priced.  

Design and pre-construction

Policy and standards

A shifting policy and regulatory landscape both nationally and locally can influence the capital cost of construction. For example, the Future Homes Standard will be fully implemented in 2025.  The Standard requires significantly higher energy performance from all new residential homes. Implementing the Standard could carry a cost premium at the construction stage. Indeed, an increased focus and client policy on delivering decarbonisation and net zero carbon can also contribute to capital construction cost. Other examples where there may be cost impacts for projects include local planning policy (including the requirement to deliver affordable homes), local regulations around Homes in Multiple Occupation (HMO), and national fire safety regulations. Specialist advice should be sought from suitable consultants.  

Design efficiency

Building efficiency is, of course, an important aspect of design impacting construction cost. Investors, developers and operators will want to ensure that the building layout and associated outcomes will be optimised and aligned to their adopted models. Key metrics can be used to help indicate the efficiency of a design, alongside its forecast financial performance. These should always be viewed alongside other considerations such as wellbeing, health and safety and customer experience. For example, the net/gross ratio on floor area indicates, in simple terms, how much of the floorplan is usable space, directly unlocking value. Some residential buildings might achieve 80%. Units per core per floor, glazing ratio, storey heights and wall/floor ratios are also good measures of building efficiency.   


As with any built asset, the chosen specification, both internal and external, will have a significant influence on the cost. For example, premium finishes and fittings will drive a more premium cost. However, they may also drive a more premium value and specification tends to be viewed through a cost/value lens as a result.  
That said, some aspects of specification enhancement might not directly drive value. These could include some of the requirements of the Future Home Standard and proposed building regulations associated with energy efficiency and overheating. Many BTR operators will seek to standardise specification across their brand in order to drive design, procurement and operational efficiency, as well as a consistent customer experience.  

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