Real Estate

Goldman-backed housebuilder to build Europe’s largest home factory in the UK

A developer backed by Goldman Sachs has announced plans to construct a new housebuilding mega-factory in the UK, which it says will help to address the country’s chronic shortage of homes. 

TopHat, a modular housing developer, which is 70 per cent owned by US bank Goldman Sachs, is planning a new factory in Corby, Northamptonshire.

When it is completed next year, the facility will be capable of producing 4,000 homes a year, making it Europe’s largest modular housing factory, according to TopHat.

The company and other start-up builders such as Ilke Homes and the modular development arm of UK insurance group Legal & General are aiming to disrupt the UK’s housebuilding sector, which is dominated by a clutch of large developers. 

The companies use so-called modern methods of construction, or MMC, putting together rooms, units or entire homes on factory production lines before moving them to sites. 

The process requires significant scale to be cost-effective but can ultimately result in a faster, more efficient construction process without compromising build quality, according to Jordan Rosenhaus, TopHat’s chief executive. 

One constraint on traditional developers in the UK is a shortage of skilled labour. But factory construction is a more automated process, meaning “we can scale at a pace that is thus far unseen. When you have the technology in place and the processes and systems, and you’re not reliant only on skilled labour, you can scale up quickly,” said Rosenhaus.

The company already has a factory in Derby capable of turning out 800 homes a year, but the new site will establish TopHat as a serious player in UK house building. Last year, only a handful of UK companies built 5,000 homes or more.

The UK badly needs new sources of housing supply, with annual construction rates currently running tens of thousands below the level the government has said is required to address the national shortfall.

Goldman-backed TopHat and Ilke, which has attracted funding from private equity firm TDR Capital and the government, are hoping to make inroads and persuade buyers that a house built in a factory is of a similar or better standard than one built on site. 

But it is likely to be years before modular builders trouble traditional housebuilders, according to Chris Millington, a property analyst at Numis. 

“It’s still way more expensive to build houses in a factory. There’s a point where skilled labour inflation is more than unskilled labour inflation, and that will start to close the gap between the two,” he said.

Ilke, TopHat and L&G are each lossmaking as they try to build scale. TopHat said it expects to hit profitability by 2024.

“In 10-20 years’ time it could be 5-10 per cent of the industry, 15 per cent maybe. In the short term, given the cost differential . . . it’s not going to be become mainstream,” said Millington.


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