ABU DHABI // Some developers and contractors embraced the emirate's sustainable building code when it became mandatory in September last year - but many more grumbled.
They warned environmentally friendly buildings would cost more and take longer to build.
But despite their fears, the first project to finish the process - the Imperial College London Diabetes Centre in Al Ain - was completed on time in July, with motion-activated lighting and solar-panel water heaters. The centre opened to patients on September 28.
"It wasn't cumbersome," said Ihsan Al Marzouqi, a senior manager at Mubadala Healthcare, the centre's developer. "It wasn't a burden on us. We actually benefited a lot."
The diabetes centre is proof the Estidama Pearl Rating System can work, officials said this week.
"It's not on paperwork any more," said Edwin Young, an adviser for Estidama, which is Arabic for sustainability. "It actually exists."
Through a system of required credits and extra points, the Pearl Rating System promotes projects that are energy-efficient, use less water and create a healthier living environment.
Designs are assigned a grade from one to five pearls (the highest). The diabetes centre received a two-pearl rating.
New villas, buildings and communities must achieve at least one pearl. New government buildings must achieve at least two.
Developers reacted to the system in the same way companies everywhere respond to new environmental regulations, said Holley Chant, director of sustainability at KEO International Consultants.
"There was the very small portion who wanted to be considered innovators and they led the pack," Ms Chant said. "And then there were the late adopters, who were the screamers and the shouters: 'Why are we doing this, it's terrible'."
In the final one and a half months of 2010, all but three applications for building permits in Abu Dhabi were rejected because they did not meet Estidama requirements.
"Things are going smoother now," said Humaid Al Hammadi, the associate planner with the Urban Planning Council (UPC).
The UPC has overseen 88 project applications since Estidama was introduced and approved 54, sending 33 back for revision. One is under review.
Other one-pearl applications were approved by Al Ain and Abu Dhabi municipalities. The UPC does not oversee most one-pearl projects unless the developer needs help.
Projects receive a rating for design and another after construction. The UPC is devising an "operational rating" to be given about two years after a project is finished.
On November 21, the Al Ain centre became the first building to receive a construction rating.
Mubadala Healthcare - a division of Mubadala, a government-owned strategic investment company - declined to release the project's forecast and actual costs.
But Mazen Al Dahmani, the general manager of the diabetes centre, said Estidama "had a very minimal impact".
Mubadala hired a consultant for the ratings and construction process, Mr Al Dahmani said.
The UPC has trained about 800 consultants, called Pearl Qualified Professionals, but has more work ahead, officials said.
Some developers still do not realise they must create an Estidama plan until they request a building permit, said Cara Tissandier, the associate head of sustainability in the Mena region for the engineering consultancy Hoare Lee.
Then they must go back and find ways to meet the requirements, prolonging the process.
"For the most part, the larger developers like Aldar, they know they have to do it," Ms Tissandier said. "It's more the smaller developers or those who haven't done a project recently."
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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