As the UK property market becomes increasingly competitive and developable plots become increasingly scarce in urban areas, forward-thinking developers are turning to more innovative ways to deploy development finance. While traditional residential schemes still have their place, savvy investors are now leveraging finance to unlock value in underutilised spaces, embrace new construction technologies, and align with ESG-driven investment criteria.
In this article, we explore five emerging use cases for development finance that are reshaping the UK's built environment - from building skyward on rooftops to assembling homes in factories. Whether you're a seasoned investor or a developer seeking your next niche, these strategies offer compelling new avenues for growth.
1. Airspace Development: Maximising Value from Rooftops
With land values soaring and planning pressures intensifying, airspace development - the construction of new residential units on top of existing buildings - has become a lucrative strategy. Development finance is being increasingly deployed to fund these projects, often structured as bridging finance or mezzanine loans to cover design, planning, and modular construction costs.
The UK’s Permitted Development Rights (PDR) reforms have made it easier to secure approvals for rooftop schemes, particularly in urban centres like London, Manchester, and Birmingham. Investors benefit from low land acquisition costs, while property owners retain the freehold. Airspace can generate significant uplift in GDV (Gross Development Value), especially when paired with modern offsite construction methods that reduce disruption to existing residents.
2. Brownfield Site Redevelopment: Breathing Life into Forgotten Land
Brownfield regeneration sits at the heart of the UK government's housing strategy, offering both environmental and economic incentives for developers. Development finance plays a crucial role here, particularly in early-stage funding for remediation, feasibility studies, and planning. Lenders are increasingly comfortable backing experienced sponsors in this space, especially where public funding (e.g. the Brownfield Land Release Fund) is available.
From former industrial estates to derelict retail parks, these sites offer strong potential for mixed-use and residential development - provided contamination and infrastructure challenges are addressed. Well-structured finance solutions, including joint venture equity and senior development debt, allow developers to unlock long-term value while supporting urban renewal.
3. Build-to-Rent and Co-Living: Financing the Future of Urban Living
Build-to-rent (BTR) has matured from a niche asset class into a core institutional product, with billions in private and pension capital now flowing into the sector. Development finance is essential in bringing these large-scale schemes to market, often through senior loans with structured drawdowns aligned to construction milestones.
Co-living, meanwhile, addresses the affordability gap for young professionals in major cities. Operators like Spaces Co-living, The Collective and Gravity have used finance creatively to retrofit buildings or develop purpose-built schemes with shared amenities and flexible tenancies. These projects appeal to investors for their long-term income profile, low void rates, and alignment with shifting demographic preferences.
4. Modular Housing: Speed Meets Scalability
Factory-built, volumetric modular housing is gaining serious traction as a faster, more cost-controlled alternative to traditional construction - particularly for affordable and social housing providers. Development finance for modular schemes is typically structured to accommodate upfront manufacturing costs, with lenders increasingly tailoring their products to the payment schedules of modular contractors.
Firms like nHouse are leading the way, offering precision-built homes delivered in weeks, not months. In the current climate of labour shortages and inflationary pressures, modular delivery reduces risk, improves margins, and helps meet housing delivery targets. Government-backed initiatives are also helping to de-risk these projects for lenders and developers alike.
5. Sustainable & Green Developments: Financing the ESG Agenda
As ESG mandates tighten and investors demand greener portfolios, development finance is being restructured to support energy-efficient and sustainable construction. Green development loans are now available to fund everything from low-carbon building materials to renewable energy installations like solar, ground-source heat pumps, and battery storage.
Forward-looking developers are using finance not only to meet compliance standards but to differentiate their projects in the market. The long-term savings in operational costs, plus potential valuation uplifts, make green developments an increasingly viable proposition.
Development Finance Through a New Lens
Development finance is no longer just about building homes - it’s about unlocking smarter, more sustainable opportunities in a changing market. From rooftops to brownfields and modular to co-living, the most successful UK developers are those using finance creatively to stay ahead of the curve.
Looking to fund your next project? Get in touch with Bridgemore Capital to explore bespoke development finance solutions tailored to your strategy.
