The UAE, known for its prowess in oil, energy, and innovation, is now leading the charge in a new frontier: Sustainable real estate. Responsible for 40 percent of global CO2 emissions, real estate is a key driver in achieving the ambitious climate targets set by the Paris Climate Agreement.
Today, the UAE is not just keeping pace, but setting the standard for sustainability in the region. This has been apparent not just through pioneering projects such as Sustainable City in Dubai and Masdar City in Abu Dhabi, but also in its leadership at COP28, and in the UAE Consensus, which, of course, includes an unprecedented reference to transitioning away from fossil fuels.
The shift towards sustainability is not just a moral imperative for the future of the planet, but also a smart business move. In the UAE’s thriving real estate sector, sustainable development is no longer a choice, but a necessity for continuing to attract investments and boost market valuations.
Data strongly supports the business case for sustainable development in the UAE. According to a 2022 report by JLL, 73 percent of investors worldwide believe that green certifications drive higher occupancy, higher rents, higher tenant retention, and overall higher value. This perception appears to be even stronger in the MENA region, where 80 percent of respondents believe that building rents are subject to either a brown discount or a green premium.
And it is not just a perception. A CBRE analysis of 20,000 US office buildings shows that LEED-certified buildings command a rent premium of 4 percent. A similar JLL report showed a premium of 6 percent, a trend mirrored in the UAE, where sustainable buildings also achieve higher rental rates. Tenants want to be environmentally responsible. They also want the lower utility bills associated with energy-efficient buildings. Such trends make sustainability a critical factor in business decisions.
When Siemens decided to locate their Middle East headquarters in Abu Dhabi, they didn’t want to pay more than the market rate. By necessity, the team at Masdar City developed a methodology that prioritised social, economic, and environmental sustainability from the beginning of the design brief, making their capital expenditure for what would become the first LEED Platinum building in Abu Dhabi nearly identical to that of a standard building.
In 2024, the UAE continues to push forward with its sustainability goals through the introduction of net-zero energy buildings. The nation’s first net-zero energy commercial building was completed in Abu Dhabi in late 2023. It utilises 53 percent less energy than international baselines and is equipped with solar panels that generate 102 percent of its annual energy needs, contributing excess power back to the grid. This project is part of a plan that has several other LEED Platinum and net-zero energy buildings underway in the emirate, most of which have already been leased.
This work is influencing broader market dynamics across the region, where there is clear market preference for properties that align with sustainability standards. In Dubai, LEED-rated properties, especially those rated Gold and above, account for about 24 percent of the monitored space and have an occupancy rate of 96 percent.
In Abu Dhabi, the scenario is similar. LEED-rated buildings now represent over half of the total institutional-grade gross leasable area, achieving an occupancy rate of 96 percent, markedly higher than non-LEED-rated buildings. This includes Masdar City, which has 21 LEED-rated buildings with 100 percent occupancy.
Some developers believe they need to choose between profitability and sustainability. But the trends outlined above point to a sustainable future where environmental responsibility and financial gains must go hand-in-hand. If we do not choose sustainability, we will, in fact, be left behind.