Abu Dhabi real estate turns green

Capitalizing on investor demand for sustainable real estate development can help Abu Dhabi take its real estate sector to new heights, according to leading industry experts gathered at the Abu Dhabi Real Estate Roundtable.

“Globally, there is a growing call for adoption of ESG and sustainable development,” said Anthony Taylor, senior executive officer at Masdar Green REIT, in a high-level discussion organized by MEED and Mashreq on September 28.

“Investors are increasingly looking for ‘responsible’ investment opportunities and evaluating companies against specific ESG practice criteria. This highlights awareness of the climate crisis and how the real estate industry must address it.

“Now that there is a necessary awareness of the need for climate action, we must continue to take small steps that will make a big difference in the future,” Taylor said.

growing demand

Stakeholders have seen demand for properties that meet the emirate’s high environmental standards.

“As an example, Siemens, which globally requires its offices to achieve a minimum LEED Gold certification, chose to locate their regional headquarters in Masdar City, which is already one of the largest low-carbon building complexes in the world,” said Francisco Galan, Director, Masdar Green REIT and Head of Development and Portfolio Management, Masdar City.

The German multinational’s regional headquarters in Masdar City is Abu Dhabi’s first LEED Platinum-certified office building and one of the first assets acquired by Masdar Green REIT in 2020.

Major decisions, such as the location of headquarters, have once again highlighted investor and occupier interest in sustainable real estate options. Masdar Green REIT offers investors the option to invest in sustainable income-generating real estate assets, primarily in Masdar City.The REIT also provides a vehicle through which third-party sustainable developers can monetize their assets, attracting real estate developers to Masdar City and attracting aspiring local and international sustainable investors

Francisco Galan, Masdar Green REIT

The demand and supply of sustainable products are interrelated. Need will drive product creation and vice versa.

“Unless there’s a change in your product, you’re going to keep building things the same way,” said a senior real estate development company representative. “It shows that people want a certain way of life and will commit to projects that support that way of life.”

In January 2022, Abu Dhabi developer Aldar announced the Sustainable Cities project, which will be jointly developed with Diamond Developers, worth AED1.8 billion (US$490 million).

The community will include townhouses, apartments and retail space on 397,000 square meters of land on Yas Island. A central part of the development is its sustainability factor. It will be powered by renewable energy and incorporate practices in energy efficiency, recycling and indoor vertical farming.

Aldar was also the first real estate company in the Middle East and North Africa (Mena) region to receive a sustainability-related loan. In 2021, it signed a five-year AED300 million loan with HSBC, linking the interest rate payable to the achievement of the Sustainable Development Goals.

read: Key highlights of the first Abu Dhabi Real Estate Roundtable

positive change

According to stakeholders at the roundtable, the relatively young responsible investment landscape is rapidly evolving. However, there are many challenges in terms of coordination and consistency in data, measurement and maintaining high standards in the real estate industry.

Organizations need to start somewhere, and considerations made today by supporting and introducing these priorities in key projects and developments can help create incremental positive change for the future.

Even as demand for sustainable products increases, issues such as upgrading existing properties and hesitancy to embrace the transition remain.

“One of the initiatives we have recently rolled out in another Dubai real estate portfolio is ARC reporting on all assets to highlight to tenants and shareholders some of the lower levels of sustainability these assets are currently achieving,” said Masdar REIT Taylor said.

The motivation behind the move, he explained, was to highlight the need for improvements at the asset level and, in some cases, tenant behaviour.

Retrofitting is another strategy that governments and developers turn to when looking to upgrade existing assets to a higher standard.

In a recent announcement, Aldar said it would invest AED 25 million ($6.8 million) in energy retrofits across 13 of its residential communities. The investment will offset 19,000 tonnes of CO2 emissions per year and reduce utility consumption across the community by AED 12 million.

read: Retrofitting could be a realistic path to net-zero emissions

Abu Dhabi-based Mubadala Investments puts responsible investing at the heart of its business. It continues to integrate responsible investment principles into its decision-making and asset management processes in the context of climate action, the energy transition and the role of business in society.

To help improve ESG fluency and institutionalization, Mubadala has established a dedicated investment unit to support its business in this process.

Implementing change is not easy, and getting people to buy into a green investment strategy can be challenging since this is a relatively new investment environment.

However, industry players say partnerships can help achieve sustainable value creation while bringing about tangible change and positive impact. Action is needed, and banks could be seen supporting such efforts by affirming their position to fund projects that meet responsible investment standards.