ESG factors can have a significant impact on the attractiveness of commercial assets to occupiers, as well as investors
Dubai: Aging office buildings in Dubai and Riyadh present a unique investment opportunity as occupier expectations start turning increasingly green, according to a new report, The ESG Imperative – The View From The Middle East - https://bit.ly/3ehxPwC, by global property consultancy, Knight Frank.
As sustainability issues take centre stage globally, environmental, social and governance (ESG) considerations are growing in importance. With 40% of global greenhouse gas emissions traced to the buildings we occupy, the imperative to go green has never been stronger. Furthermore, ESG factors can have a significant impact on the attractiveness of commercial assets to occupiers, as well as investors.
WINNING THE WAR FOR TALENT
Faisal Durrani, Partner – Head of Middle East Research, Knight Frank, explained: “Occupying best-in-class office space is no longer a nice-to-have, but a need-to-have. Businesses are quickly discovering that to win the battle against the global talent shortage, a key tool is occupying world-class office space that effectively doubles as a showroom. This allows a business to showcase itself to potential clients as well as future talent, while offering a workspace that employees are proud to work in. This will be critical as we emerge from the pandemic.”
Knight Frank’s report points to Dubai’s office market, where there has been a sharp return to rental growth for locations that have higher concentrations of new, or relatively modern stock. Submarkets such as Business Bay, the DIFC and the Dubai Design District have all seen rents surpass pre-COVID levels, while older parts of the city where there is a higher concentration of older, more secondary stock are still struggling to return pre-pandemic lease rates. This is not necessarily due to a lack of demand in the market, says Knight Frank, but a lack of demand for older offices.
Durrani continued, “The flight to quality and sharpened focus on Grade A space is reflected in the fact that Grade A buildings in Dubai have occupancy levels in the high 80’s to low 90’s per cent, while in Riyadh, Grade A occupancy levels are hovering around the 97% mark.
“While the DIFC retains its position as Dubai’s financial heart and commands the highest office rents in the city, its buildings are rapidly aging. Indeed, 51% of the precinct’s 6 million square feet of office space was completed before 2010. The same is true for some other popular locations such as Dubai Internet City and Dubai Media City, where the average age of office buildings is 15 years across the 10.3 million square feet of office space in these areas. Similarly, in Riyadh 50% of office space on King Fahd Road and 84% of office space on Olaya Road is over 5-10 years old.”
Inevitably there will have been some refurbishment activity across these markets, but without extensive refurbishment that is ESG compliant, some buildings may start to see increasing voids and falling rents as occupiers gravitate towards more modern and green buildings.
Ben Walker, Partner – Head of Project and Building Consultancy, said: “All is however not lost for older buildings. Grade B buildings are often better located in that they are completed communities, with supporting infrastructure already in place. Clearly it will not necessarily be financially viable to refurbish all Grade B buildings, but the traditional demolish-and-rebuild approach in the region may soon be difficult to achieve as banks scrutinise the carbon footprint of new schemes before awarding development financing. Indeed, the carbon footprint of a refurbishment is far lower than the demolish and rebuild route”.
According to Knight Frank, average renovation or refurbishment costs for office buildings in Dubai currently range from approximately AED 280 psf and can be as high as AED 580 psf.
Walker added, “For refurbishment projects, a 40-50% uplift in the cost of the contract is the norm when attempting to achieve a LEED Silver rating. Clearly it may not always be possible to achieve a Platinum LEED rating as the cost may far outweigh any expected benefit and some older buildings may not be suitable to accept the retrofit needed.
“Overall, however, the message from businesses is clear: ESG credentials are quickly becoming a must have, especially for international blue-chip businesses. And this is not necessarily just LEED. It also includes WELL certification, which is focused on the experience of the occupants of a building, but also WiredScore Certification.
“Landlords may view this as lost cap-ex, but we have evidence from mature cities such as London where we have evidence to show clear rental premia associated with ESG-badged office buildings. There is no reason why we cannot expect to see the same in Dubai, particularly while internationally accepted, green-rated buildings remain in short supply”.
Knight Frank also highlights the investor appetite for green-rated buildings, with over US$ 120 trillion worth of real estate assets managed by funds that are signed up to voluntary climate-change disclosures.
“The region is yet to successfully attract global institutional capital in a meaningful way. The key reasons have been around the lack of assets of scale and market transparency. All that being said, investors are abandoning brown assets in favour of green-rated buildings. So, we have a clear opportunity to create these assets, attract strong covenants and deliver these green assets right into the hands of ESG-hungry funds.
“A significant test will come in the form of the US$80 billion 2024 IPO planned by the US$500 billion Saudi super-city NEOM, which has placed sustainability at the heart of its development objectives”, concluded Durrani.
More than 60 experts from ministries, public and private organisations, as well as local and international corporations, explored challenges and opportunities in the sector.
Dubai, United Arab Emirates: The third edition of the Future Food Forum, concluded yesterday highlighting the need for redefining regulations, consumer trends, crisis management and innovation in F&B safety and packaging, upcoming innovative ingredients, and brand building on social media.
he event was organised and hosted by the UAE Food & Beverage Manufacturers Business Group, presented by Food Tech Valley and in strategic partnership with Dubai Chamber and, welcomed over 60 F&B manufacturing thought leaders to deliberate on opportunities and challenges in achieving sustainability and food security, with a special networking session for FBMG women leaders.
Saleh Lootah, Chairman of the UAE Food & Beverage Manufacturers Business Group, said: “We are pleased to see the overwhelming support from the regulators and businesses, as we aim to deliberate strategies that can transform the nation’s food and beverage manufacturing sector by significantly increasing its contribution to the national economy. As a group, we are committed to working on enhancing the competitiveness of the UAE F&B sector and committed to supporting the National Food Security Strategy 2051.”
Moderating the first panel of the day, Dr. Hassan Bayrakdar, Founder and Managing Director, RAQAM Consultancy said: “Enhancing communication channels between regulators and the F&B industry, constant and coherent updates on policies, and frequent deliberations on existing challenges will be key in boosting the productivity of the sector. This will aid us to innovate for the future on a global scale instead of fixing challenges that are of the past, a proactive regulatory atmosphere will help us be prepared for very important changes in the sector.” The session also featured Omar Hisham, Business Development Manager, RAQAM Consultancy; Eng. Ali Rashid AlGhafri, Director, Food Standard and Conformity, Oman; Eng. Reem Mahmoud Alqaisi, Head of Food Standards and Quality Department, Jordan Food and Drug Administration; and Lucas Blaustein, Regional Agricultural Attaché, U.S. Department of Agriculture.
Andrey Dvoychenkov, General Manager, NielsenIQ - Arabian Peninsula & Pakistan, highlighted how consumer lifestyle is changing as they make healthier choices, look for food that doesn’t affect the environment and their health, and are curious to try new products. The panel also hosted Igor Marti, Vice President MENAT, BRF; Manisha Juneja, Global Research Manager, Toluna UK; Sam Gill, Regional Manager - MENA, Meat & Livestock Australia; and Shahid Khan, CEO, Al Islami Foods, UAE; and was moderated by Ahmed Bayoumi, CEO, Global Food Industries, UAE.
Other panel discussions on the day focused on varied themes including - managing crises within the food and beverage supply chain, the future of food and beverage packaging, an overview into the world of exciting new ingredient technologies and innovations for healthier food, and the challenges of a new era in food safety in disrupted times.
A special FBMG Women Leaders Networking Session with female leaders in the sector who shared their experiences and at two back-to-back panels, which hosted – Melda Yasa Cebe, Managing Director MEA, Kraft Heinz; Amal Al Ahmadi, Head of Research and Development, Ministry of Climate Change and Environment UAE; Forough Ahmadi, Deputy CEO, NTDE, Samah Al Hajery, Director, Cooperatives and Strategic Reserve, Ministry of Economy; Jeanette Kristensen AL Haider, GM Emirates National Food; Marcela Sancho, Co-founder House of Pops, Dimple Tahiliani, Head of Operations, Arab India Spices; Disha Pagarani, Director of Sales & Marketing at Pure Food Processing Industries; and Yan Narayan, Director, Hunter Foods – who were honoured by the UAE Food & Beverage Manufacturers Business Group.
The panel hosting top influencers on how to plan F&B brands’ social strategies discusses why it is important to target audiences beyond the local market, use content in multiple languages, and engage with their audience by interacting with them promptly. The session was moderated by Saleh Lootah, Chairman of the F&B Manufacturers Business Group hosted influencers including Munthir Al Muzai Al Shamsi, Amal Ahmad, Mohammad AlBanna, and Abdullah Ismail.
Manisha Juneja, Market Research Lead-Middle East & Africa at Toluna, said: “The middle east region is experiencing a surge in the consumption of plant-based food and beverages, especially over the past few years. A study that we have recently conducted in UAE & KSA to understand how the plant-based category is shaping, revealed that more than half of the residents have either tried or have started consuming plant-based products in the past 6 months, compared to merely 9% of the population. Surprisingly 38% of those who consume plant-based products have claimed themselves to be flexitarians and no Vegetarians in UAE and the same is true for 30% of the consumers of plant-based products in KSA. The top three influencing factors in consumers’ minds include freshness, quality, and nutritional value. Accordingly, brands need to communicate more on these parameters to build trust, encourage brand trial and gain market share.”
Szymon Ulanowski, General Manager, Spyrax Sarco Middle East & North Africa (MENA), who attended the event said: “I commend the forum for highlighting the importance of efficiency during the food production process as a key part of achieving sustainability and product quality including their longevity, and even flavour, something we at Spirax Sarco provide to our end-users through our expertise and equipment. I am pleased to see the F&B dialogue going beyond the packaging and shelf life to discuss how each component on the factory floor impacts the safety and quality of products.”
The last programme on the day honoured young chefs and food influencers of Instagram, Maitha and Abdulrahman, as well as the forum chair, Sumeet Mathur for spearheading the Future Food Forum over three editions as chairman initiative to bring together the sector through the forum. Reflecting on the programme Sumeet Mathur said: “There was a lot of knowledge that was being shared on this stage by over 90 experts, more importantly, the chemistry between the participant and how connected to almost all topics being discussed, made this a must-attend event for the sector. Seeing the spirit of collaboration shown here, I believe we will go to a better future as an industry.”
Around 700 CEOs and government and regulatory delegates participated in the two-day event, which featured high-level keynote addresses, in-depth panel discussions, and fireside chat sessions driving diverse aspects of the F&B manufacturing value chain.
About the Future Food Forum 2022:
The Future Food Forum 2022 is hosted by the UAE Food & Beverage Manufacturers Business Group; it aims to connect and develop the food and beverage manufacturing industry and leaders and empower industry growth. The forum will discuss how regional, corporate and government institutions face different food and beverage industry issues. Furthermore, with interactive panel sessions, CEO roundtables, and other activities, Future Food Forum 2022 strives to become a one-stop platform to learn the best practices.
Regulatory laws and legislation are needed to establish and facilitate the implementations of Circular Economy (CE) and prevent natural resource waste in the region, said the Arab Monetary Fund (AMF) in a study.
In order to achieve sustainable development and green economies in Arab countries, strategies need to be integrated into the governments’ economic policies and frameworks.
The process can be facilitated by drawing examples from international experience, the AMF study on ‘Towards a Circular Economy in The Arab Region: Development of Transformation Measurement Index’, said.
The study aims to build an index to measure CE. The index is established based on globally recognised CE indicators that can be used to measure countries' transition toward circular economy.
In light of the proposed index developed by the study, policymakers and stakeholders can determine the countries' transmission level toward CE implementation, adopt policies, reducing waste in natural resources, and built the CE relevant activities that support achieving economic, environmental, social sustainability, and enhancing the added value of Arab economies.
KUWAIT CITY: More than 42 million old vehicle tires dumped in Kuwait’s sands have started to be recycled, as the Gulf state tackles a waste problem that created one of the world’s largest tire graveyards.
The massive dump site was a mere 7 km from a residential suburb. Residents were bothered by periodic large fires releasing noxious black smoke.
But this month Kuwait, which wants to build 25,000 new houses on the site, finished moving all the tires to a new location at Al-Salmi, where recycling efforts have begun.
At a plant run by the EPSCO Global General Trading recycling company, employees sort and shred scrap tires, before pressing the particles into rubbery coloured flooring tiles.
“The factory is helping society by cleaning up the dumped old tires and turning them into consumer products,” said EPSCO partner and CEO Alaa Hassan from EPSCO, adding they also export products to neighbouring Gulf countries and Asia.
The EPSCO plant, which began operations in January 2021, can recycle up to 3 million tires a year, the company said. Scrap tires are a major environmental problem worldwide due to their bulk and the chemicals they can release.
Kuwait, an OPEC member with a population around 4.5 million, had about 2.4 million vehicles in 2019, Central Statistical Bureau data shows, up from 1.5 million in 2010.
The government hopes Al-Salmi will become a tire recycling hub, with more factories planned.
The Al Khair Group transported more than half of all the tires to the new site using up to 500 trucks a day and is planning to open a factory to burn the tires through a process called pyrolysis, its CEO Hammoud Al-Marri said.
Pyrolysis produces a type of oil which can be sold for use in industrial furnaces such as cement factories, and an ash known as carbon black that can be used in various industries.
Source: Arab News