Unlocking Additional Returns Through Insulation Specification

There is little question that homebuyers place a premium on living space when choosing a property. The challenge for developers is how to deliver this whilst keeping the overall footprint of each unit as compact as possible. One solution is to specify more thermally efficient insulation for external walls. This can allow the required level of thermal performance to be met with slimmer constructions. New research from Currie & Brown has now shown that by adopting this approach, it is possible for developers to raise property values and achieve significant returns on the additional cost of these insulation materials.

Insulation impact

The fabric performance requirements for homes have tightened considerably over recent decades and this process is set to continue as we move towards a net-zero carbon built environment. In the recent consultation on the next changes to Part L of the Building Regulations in Wales, for example, the notional dwelling features an external wall U-value of just 0.13 W/m2K.

When selecting insulation materials to meet these requirements, it is important to pay close attention to their thermal conductivity. This is the measure of how well they resist heat loss through conduction. The lower the thermal conductivity, the more effective they are at preventing heat loss. Cheaper insulation materials often have relatively high thermal conductivities meaning an increased thickness of insulation is required to achieve a desired U-value. By investing a little more in materials with lower thermal conductivities, in contrast, it is possible to notably reduce wall depths and increase floor area.

Currie & Brown recently undertook a research programme to quantify the financial value of this additional floorspace.

Database research

The study first identified four common external wall constructions to be assessed. For each construction, two build-ups were created which differed solely in insulation specification. One used rigid phenolic insulation products with a thermal conductivity of 0.020 – 0.018 W/mK, whilst the other featured rock mineral fibre insulation with a thermal conductivity of 0.038 W/mK. The constructions were designed to achieve a U-value of 0.16 W/m2K. Due to availability of product thicknesses’, in some instances the build-ups overachieved this target U-value.

Currie & Brown carried out a thorough cost analysis for each construction. This ignored prelims, contingency and professional fees but factored in a deep review of cost differences such as materials, labour and sundries.

The firm then generated a database of 20 building instances representative of the housing stock within Britain, including factors such as location, size, design and rental value. These buildings were analysed with each of the wall constructions to assess how much additional space could be recovered using the phenolic specifications. The return on investment (ROI) was then calculated by dividing the additional cost of the insulation by the capitalised value of the space (in terms of rental income and yield). The saleable value of this space was also calculated.

Out of the 20 database buildings that were analysed for each wall construction, 100% showed a positive ROI. In addition, all 20 of the database buildings analysed showed a positive return on the ‘for sale’ element.

Real case studies

To verify these results, Currie & Brown then carried out further analysis on 4 real domestic building case studies on which they and Pollard Thomas Edwards have provided cost consulting services in recent years. These buildings again included a range of building types and locations.

For example, one building that was assessed was a three storey, four bedroom house which forms part of a mansion block development on the outskirts of Cambridge. The building features a brick and blockwork cavity wall and, when using full-fill rock mineral fibre insulation within this construction, the property had a useable floor area of 158 sqm. By switching to the rigid phenolic insulation product with a 10 mm air gap, it was possible to recover 12.7 sqm of floor space from the envelope. As a result, whilst this specification raised initial costs by £18,701, this was more than repaid by the capitalised value of the space which was estimated at £43,595 – a return of 133%. The additional sale value of this space was calculated at £48,186.

The other three buildings assessed also showed the potential to achieve a positive ROI on the additional cost of the insulation up to an astonishing 2,213% (for a student accommodation block).

Future challenges

The research from Currie & Brown clearly demonstrates the benefits that developers can achieve by specifying more efficient insulation materials within the external walls. These are only likely to grow in the future, as tightening energy performance requirements within the Building Regulations and Standards mean that walls must be more highly insulated. Therefore, it is worth carefully considering during specification as a way of driving better value from developments.