Insights: How GCC real estate is pivoting towards sustainable development

Sustainability is fast becoming a top agenda in the real estate sector worldwide. The increasing demands in the last decade to reduce greenhouse gas emissions and manage climate change have led to a global call for greener, more sustainable built environments.

The international community’s commitment to combating climate change materialised in the form of the Paris Agreement and the United Nations Sustainable Development Goals (UN SDGs). This historic accord aims to tackle the detrimental effects of climate change and pursue efforts to limit global warming to 1.5 degrees Celsius. As of 2023, the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait and Oman ratified the agreement, marking a strong commitment to sustainability.

What better way to showcase the UAE’s commitment to global sustainability and climate change action than by hosting the 28^th session of the Conference of Parties (COP 28) to the United Nations Framework Convention on Climate Change (UNFCCC) in Dubai from 30 November 30  to December 12.

With its proven experience in the energy and sustainability sectors coupled with its strong diplomatic relations with global nations, the UAE is determined to find practical, viable, and shareable solutions to the world’s most pressing environmental challenges.

Global sustainability in real estate is further encouraged by industry-specific initiatives such as the Global ESG Benchmark for Real Assets (GRESB), which standardises the benchmarks for the assessment of environmental, social, and governance (ESG) performance of real assets (including real estate).

Furthermore, green building standards and certification systems, such as Leadership in Energy and Environmental Design (LEED), Building Research Establishment Environmental Assessment Method (BREEAM), and Green Star, play pivotal roles in guiding sustainable construction and building operations on a global scale, including in the Gulf Cooperation Council (GCC) countries.

GCC’s sustainability targets and initiatives

Sustainability has emerged as a pivotal aspect in shaping public policies and private initiatives around the world.

In the GCC countries, these efforts have taken on unique characteristics, mirroring the global movement towards more sustainable practices and focusing on the specific challenges and opportunities of the region. The GCC (in particular, the UAE and Saudi Arabia) has made significant strides in this area by developing comprehensive and robust strategies to ensure sustainable development in their real estate sectors.

The Middle East Green Initiative: The Middle East Green Initiative (MGI) is a comprehensive programme aimed at achieving sustainability and promoting eco-friendly practices across the region.

The initiative is endorsed by over 30 countries worldwide, including the GCC members, and is spearheaded by Saudi Arabia in an attempt to accelerate the adoption of renewable energy sources and implement various measures to reduce the carbon footprint of developments.

The MGI aims to decrease carbon emissions from regional hydrocarbon production by over 60 per cent and plant 50 billion trees throughout the Middle East. In relation to degraded land with an area equivalent to 200 million hectares, there is an ambitious goal of restoring their characteristics through restoration.

UAE: At a federal level, the UAE is a party to a number of initiatives aiming to improve its sustainability, including the UN SDGs, UAE Energy Strategy 2050, and UAE Green Agenda 2015-2030. The initiatives aim to achieve net-zero emissions by 2050, which underscores a clear commitment to reducing dependence on non-renewable sources and embracing more sustainable, clean energy alternatives.

There are a number of commitments to targeting sustainability in the real estate sector in the UAE, such as Abu Dhabi Vision 2030, Estidama Pearl Rating System, Dubai 2040 Urban Master Plan, Ras Al Khaimah Energy Efficiency and Renewable Energy Strategy 2040.

In Abu Dhabi, the Estidama Program – meaning ‘sustainability’ in Arabic – is an initiative developed by the Abu Dhabi Urban Planning Council to incorporate sustainable design principles into the city’s urban development. This initiative is unique because of its Pearls Design System, a framework for sustainable design (which is similar to LEED).

Saudi Arabia: In line with Vision 2030, the kingdom also launched the Saudi Green Initiative on a domestic level to work on increasing its reliance on clean energy, offsetting emissions, and protecting the environment.

The eight objectives of this initiative include:

• achieving net zero emissions by 2060
• reducing carbon emissions by more than 278 million tonnes per annum by 2030
• increasing domestic generation capacity from renewable energy to 50 per cent by 2030
• contributing to cutting global methane emissions by 30 per cent as part of the Global Methane Pledge by 2030
• planting 10 billion trees and rehabilitating 30 million hectares of land over the coming decades
• planting 450 million trees and rehabilitating 8 million hectares of degraded land by 2030
• raising protected areas to more than 30 per cent of total land area; and
• achieving 20 per cent protected terrestrial, coastal, and marine environments by 2030.

As part of its strategy to become a global frontrunner in sustainable tourism, Saudi Arabia announced the creation of the Sustainable Tourism Global Centre in Riyadh, which aims to conduct extensive research and development to foster sustainable practices within the tourism industry.

Key objectives include reducing carbon emissions within the sector, creating green tourism infrastructure, and promoting sustainable business practices amongst tourism enterprises.

Other GCC countries: This transformation is equally evident in the other GCC countries, where rapid urbanisation and economic growth have heightened the need for the reduction of emissions, an increase in the use of renewable energy sources, and sustainable practices within their economies, including the real estate sector. They laid out ambitious sustainability targets as part of their national visions such as Bahrain’s Economic Vision 2030, Qatar’s National Vision 2030, Kuwait’s Vision 2035, and Oman’s Vision 2040.

Regulations

The General Regulations of Environment in the GCC States 1997, sets out – among other things – general principles and rules on the environment, and the duties of the public bodies and individuals in respect of the environment.

Saudi Arabia: The kingdom’s commitment to sustainability is formed in a number of regulations, including the Saudi Building Code, Technical Regulation for Water Rationalization Tools, Saudi Energy Efficiency Center’s (SEEC) regulations aimed at rationalising water consumption, pushing for mandatory requirements for thermal insulation, renewable energy systems in buildings, reducing energy consumption and promoting sustainability.

UAE: In recent years, the UAE has introduced various initiatives, laws, and regulations to foster sustainability in the real estate sector. This commitment is part of a broader national strategy aimed at enhancing environmental stewardship, social responsibility, and economic viability.

The main law relating to the environment in the UAE is Federal Law No 24 of 1999 on the Protection and Development of the Environment, which includes the requirement for an organization working as a project operator in the UAE to get a license or environmental permit from the Federal Environmental Agency before starting on any project or construction.

The Dubai Municipality has developed the Al Sa’fat – Dubai Green Building System, which introduced sustainable building practices in construction and design, emphasising environmental impact reduction and increased energy and water efficiency.

This initiative set the regional benchmark for environmental efficiency in buildings and the use of the rating system has not only increased awareness of green practices among developers but also promoted the adoption of such measures due to its linkage to building approval processes.

The UAE has also enacted laws and regulations relating to air pollution and waste management.

Sustainable projects

As environmental awareness has grown in recent years, sustainability has become an integral part of modern real estate development. The GCC countries that are actively participating in this movement have launched a number of large-scale projects in line with this global trend.

Pioneering the way for sustainable real estate cities, the UAE’s Masdar City (a sustainable urban community in Abu Dhabi) and Qatar’s Lusail City have adopted many innovative technologies aimed at utilising renewable energy sources, conserving water resources and offering a clean-energy transportation option within the city to further contribute to their carbon neutrality objectives.

Development of a 10MW solar power plant and advanced water recycling systems in Masdar, a district cooling system (one of the biggest in the world and has been designed to save 65 million tons of CO² annually), and at least two stars GSAS rating for all buildings in Lusail City have set ambitious benchmarks for global sustainable cities.

Echoing this commitment, NEOM and the Red Sea constituting pillars of Saudi Vision 2030 also outline ambitious targets for sustainability and achieving net-zero emissions. NEOM’s intention is to develop a number of key destinations including the linear city named THE LINE, a floating industrial complex in the shape of an octagon named Oxagon, a mountain destination, Trojena, and a luxury island resort, Sindalah, that will integrate technologies in energy, water, transportation, and food sectors to build a blueprint for sustainable living, while the Red Sea Project’s strategy is based on enhancing the natural habitats in ways that continually renew the environment, with 100 per cent reliance on renewable energy and a zero-waste-to-landfill policy to set new standards for sustainable tourism.

With the forthcoming COP28 in Dubai, the momentum for sustainable real estate development in GCC countries is set to receive even greater international attention. This is only the beginning as the GCC region is set to play a significant role in inspiring and influencing sustainable initiatives worldwide.

Keri Watkins is a partner, and Tessa Crawford and Jana Al-Afoo are associates at Baker McKenzie. Mateusz Resztak is currently seconded to Baker McKenzie in the Middle East.