The drive towards sustainability in the property and construction sector is no longer a choice — it is a necessity, and that goes for smaller developers as well as the corporates, says a leading mezzanine provider.
Davon, which provides funding for developers building high unit value homes, is urging SME housebuilders to adapt swiftly or risk being left behind in an industry where sustainability continues to build momentum.
With new regulations, shifting market dynamics and customer expectations rising, developers must address green construction practices as part of their business model, says Davon Director David Norman.
Changing Industry Landscape
“The property and construction industry has seen a marked shift in recent years with building regulations in the UK pushing sustainability up the priority list from optional to essential,” says David Norman.
Elements such as enhanced Energy Performance Certificate (EPC) ratings are now standard expectations while likely future updates to building regulations underline the need for green compliance, he points out.
“The era of optional sustainability is coming to an end for smaller developers as it has for the big housebuilders,” says David Norman. “SME developers may be behind the curve but they cannot ignore what is happening out there.”
He points to tightening government policies and the economic environment evolving.
“Developers who fail to meet these standards – whether they are required by law or expected by the market – risk losing access to funding and customers,” says David Norman.
Economic Pressures Driving Change
Beyond regulation, he outlines how economic factors are driving the sustainability agenda. The ongoing energy crisis has resulted in a significant increase in utility costs, heightening demand from buyers and tenants for energy-efficient homes. Customers are actively seeking developments that promise lower energy bills through features like improved insulation, renewable energy systems and high EPC ratings.
This customer pull-through effect is reshaping the market, leaving developers who ignore these trends at a disadvantage.
Access to Finance Tied to Green Credentials
The finance sector is playing a pivotal role in accelerating the transition. Some first tier lenders such as banks, particularly those aligned with green finance initiatives, now offer preferential rates for investments and mortgages that meet strict environmental criteria. For developers, these incentives help to make green building financially attractive.
Call to Action for SME Developers
Davon encourages SME residential developers to embrace sustainability as a non-negotiable aspect of their projects. Practical steps include:
Prioritising EPC Ratings: Integrating energy-efficient design and materials to meet or exceed regulatory requirements.
Considering Green Financing: Exploring opportunities to secure funding from lenders offering preferential terms for eco-friendly projects.
Staying Ahead of Regulations: Proactively adopting practices that address upcoming regulatory changes before they become mandatory.
“In this market, adaptability is key, and that goes for how you respond to the sustainability agenda,” says David Norman. “For smaller developers, this isn’t just about meeting today’s expectations—it’s about future proofing your business in a rapidly evolving industry.”
