Forbes Middle East’s Building The Future Summit 2022

The real estate and construction sector in the Middle East was going through a transformation phase before the outbreak of the pandemic two years ago. However, the pandemic presented an opportunity for the sector to accelerate digitalization for healthier and safer buildings.

Sustainability and digitalization are at the core of a major shift currently underway in the real estate and construction sector as the focus on renewable energy, net-zero economies, and infrastructure gains momentum.

Forbes Middle East held its second annual Building the Future Summit in January, bringing together industry leaders from across the region to discuss the opportunities and the way forward for the Middle East’s real estate sector.

The real estate and construction sector post-pandemic

The first panel, moderated by Ramia Farrage, Senior Producer and Presenter, Forbes Middle East, centered on the unprecedented impact of the pandemic on the real estate sector and the emerging need for sustainability. Speakers were: Mazen Issam Hawwa, Vice-Chairman and Group CEO at the United Real Estate Company; Kez Taylor, CEO of ALEC Engineering & Contracting; Tariq Chauhan, Group CEO of EFS Facilities Services; and Chris Wan, Head of Design Management for Masdar City.

Hawwa started by noting that real estate is a continuously learning industry. “There is no doubt that 2021 was one of the most challenging years for the real estate and construction sector,” he said while adding that the impact of the pandemic on the real estate sector in the

region presented challenges that were multifaceted, from financial to operations as well as supply chain disruptions. Hawwa also explained how operational costs in the construction sector had increased by as much as 6% in 2021 alone, a situation that has prompted property developers and other industry players to find ways to address these challenges.

Taylor spoke broadly on how sustainable buildings, which used to be a novelty 10 years ago, are becoming the norm. “Going into the future, I think property developers need to fully align with the objectives of the sustainable development goals (SDGs),” he said. Collectively, real estate and construction players in the Middle East are trying to reduce their carbon emissions footprint by 50% over the next five years. Property developers in the region are seeking ways to measure carbon emissions as the first step to achieve their net-zero carbon emissions target, but “I don’t think it is a standardized method at the moment,” said Taylor.

Asked about the outlook in light of emerging trends such as sustainability, Taylor said that people have come to realize that the U.A.E. is a desirable place to live, thanks to the country’s forward-thinking, innovative leadership, and great infrastructure. In line with global trends, Taylor projected an increase in urbanization and continued population growth while noting that for property developers, the major challenge will be how to deliver projects that meet the requirements of future generations.

From a designer perspective, Wan said that a simple approach in dealing with sustainability is often the best approach. “You instinctively know when you walk into a building from the lighting, the air circulation, and experience that this is a sustainable project, and that is what I see shaping the future of sustainable properties going forward,” he explained. Wan also highlighted that with a better understanding of the relationship between space and people, especially with a lot of people working from home due to the ongoing pandemic, a healthy mind is important.

Chauhan noted that as facilities management services providers, companies like EFS are at the receiving end, given that they take control of a property after construction has been finished. He noted that sometimes the properties that are being built do not “meet the standards in context to the new specifications that were established at the COP26 last October.” To ensure that the new standards are not compromised, Chauhan said that facilities management follows either regional or global standards while noting that the sector is still facing challenges in ensuring compliance with sustainable development goals when it comes to the use of certain types of chemicals and machines. When it comes to issues like energy sustainability, facilities management firms have limited control.

Hospitality and tourism in the new normal

The second panel discussed how the tourism industry has been impacted by COVID-19 and the future outlook for the industry. Moderated by Daniyal Baig, Forbes Middle East’s COO, the panel featured: Basmah Al-Mayman, Regional Director of the Middle East at UNWTO; Jerry Inzerillo, CEO of the Diriyah Gate Development Authority (DGDA); Sherif Beshara, Group CEO of Mohamed & Obaid Almulla Group of Companies; and Filip Boyen, CEO of Forbes Travel Guide.

Al-Mayman began by highlighting initiatives created by the UNWTO to support postpandemic recovery, such as the UNWTO Global Tourism Crisis Committee. “With each wave of the pandemic, the restrictions change, but in the region, we still try to harmonize our procedures,” she said.

Adding to the discussion on the regional tourism sector recovery, Beshara brought in the perspective of hotel owners, crediting the support of the local government in Dubai and the U.A.E. as instrumental to the hospitality sector during the pandemic. He stressed the dual importance of vision and planning.

Inzerillo agreed with Beshara on the importance of leadership in handling the pandemic, highlighting the “phenomenal” and “steady” leadership across the Gulf region. In Saudi Arabia, under King Salman and Crown Prince Mohammed bin Salman, “We were lucky to have that continuity of dynamic leadership,” said Inzerillo.

Boyen noted travelers wanted a human connection and to feel safe and truly cared for. “Maintaining service standards is going to be the key going forward because let’s not forget, after the frustration and the isolation that all the travelers have experienced over the last few years, they want to feel again,” he added.

The panelists spoke about how they were adopting new trends and implementing digital

innovation to enhance the visitor experience. Inzerillo said DGDA updated its technology during the pandemic. “We’ve spent a lot of time analyzing roads, electric vehicles…the UNESCO site and Diriyah are planning 40,000 parking spots, all underground, all carbon-neutral. So we’re ready to open up guest experience in a very beautiful and diversified country,” he revealed.

However, Boyen added that while technology can be leveraged to offer a more seamless guest experience: “Luxury hospitality will always be about high-touch rather than high-tech.”

Al-Mayman offered her thoughts from the guest’s perspective. “When you are a tourist now, you are more demanding for better services, health protocols…and that didn’t exist before.”

Beshara pointed out the connection between staff and guests to ensure customer service. “The important element of personal service is a personal touch. Your staff should be happy before passing the happiness to your guest,” he said. “Employees should be knowledgeable, and their language should reflect their community, their behavior, their uniforms…all of this helps.”

Is sustainable financing the way forward?

The event’s third panel, moderated by Forbes Middle East Managing Editor, Claudine Coletti, focused on the shift towards more sustainable financing and adopting the principles of environmental, social, and governance criteria (ESG). Speakers were: Richard Attias, CEO of the Future Investment Initiative Institute (FII Institute); Paschalis Bouchoris, Managing Director and Country Manager for BlackRock in the Middle East; Rola Abu Manneh, CEO of Standar d Chartered Bank U.A.E.; and Rishi Kapoor, co-CEO of Investcorp.

Talking about how adopting ESG is evolving across a key principle for many investors across the world, Attias said, “more and more institutions, corporations, and governments are taking very seriously this notion of sustainability, and even world leaders are becoming very serious.”

Bouchoris estimated investments in sustainable finance solutions and strategies at $4 trillion, noting that “Europe has been leading the way.” In the Middle East, Bouchoris highlighted important initiatives from the public and private sectors that are being launched in various fields, from energy transition to renewables to green hydrogen and sustainable urban development.

Abu Manneh shared the same sentiment, noting that the drive to establish a green economy has accelerated globally, and the MENA region is really no different. “The markets around the Middle East, Asia, and Africa are where sustainable finance matters most,” she noted.

Assessing and measuring green or sustainable projects is necessary when considering new investments or the provision of finance. Kapoor highlighted three universal principles: commitment towards diversity, equity, and inclusion; a real focus on managing and mitigating climate risks by reducing greenhouse gas emissions and waste; and a commitment towards best-in-class business ethics, governance, and transparency.

Attias described how the FII Institute is developing an ESG scoring methodology for emerging markets that is fair and inclusive. He noted that current rating agencies are unfair and called for a more inclusive ESG approach. “We are thinking of the very western approach, but not all countries can be at the [same] level of ESG, where the U.S. or Europe stand, so Africa and Asia will be behind,” he explained. “It’s not just about making a good investment but an investment for good.”

Real estate is one of the top five contributors to greenhouse gas emissions, said Kapoor. He explained that Investcorp seeks to embed core principles of sustainability into real estate, especially when it comes to multifamily residential, where it’s an active investor by providing cost-effective housing solutions at affordable price points.

Abu Manneh noted that there is an increased interest in sustainability from businesses, investors, and lenders across the region, expecting more demand for sustainable finance in MENA over the coming years, with the bank planning to mobilize on a global basis $300 billion in green and transition finance by 2030.

Attias highlighted that education is “very important” because a lot of companies have no real understanding about what they should do to be ESG compatible. “We should not forget the small to mediumsized companies because the transformation of how we mentally think of ESG will come from the very early stage.”

Bouchoris concluded that “no company, no industry can do this alone. This is why industry coalition, governments, and regulators have a significant role to play here, with taxonomies, standards, and more aligned approaches in general on data challenges that we undoubtedly face.”