While sustainability features can often confer property with a sizable profit edge, Dubai has thus far proved the exception to this rule, with its leading green buildings failing to draw a premium from tenants.
A new research report from Jones Lang LaSalle has found that the going rates for green buildings in Dubai are still only on par with their non-green peers despite the demonstrable economic benefits brought by sustainable features and the premiums they command in other major world cities.
Jones Lang LaSalle found that the one office highrise in Dubai which enjoys the highest level of environmental accreditation – the Standard Chartered Tower in downtown Dubai – currently provides lease rates at the same level as other nearby buildings, despite their comparative lack of green building features.
The Mirdif Mall, the only shopping complex in the UAE’s most populous city to boast a top LEED ranking, is in similar situation, leasing space at the same rates as other, less environmentally friendly rivals.
The failure of green building space to attract a premium in Dubai is contrary to market outcomes in other parts of the world, where sustainable real estate is far more expensive than conventional structures.
In the US, for example, tenants will pay between 2.5 per cent and 17 per cent extra for sustainable real estate. Across the Atlantic, the premiums that green building commands are even more exorbitant. Rent for green buildings in Britain is around 18 per cent greater than that for standard space, while in France the premium for green office blocks is a stunning 23 per cent.
The indifference of the Dubai property market to the merits of environmentally friendly real estate comes as a major disappointment to sustainability advocates and UAE planners, who have pushed hard to make green building an integral part of the country’s urban development.
The UAE has logged some remarkable accomplishments in the field of green building, such as The Change Initiative environmental lifestyle store, located on Dubai’s Sheikh Zayed Road, which took the title of the world’s most sustainable commercial facility after amassing a record-breaking 107 out of 110 points in its LEED certification.
The UAE is also home to 65 per cent of all LEED certified properties in the Middle East and northern Africa.
The failure of green building to generate additional profits in Dubai could hamper the concerted efforts of environmental advocates and city officials to promote sustainability.
The economic benefits brought by green building, in the form of reduced energy and water consumption, are unlikely to appeal to landowners and leasers as utility bills are paid by their tenants. As rational market actors, most property owners are motivated by personal interest as opposed to public welfare, and paying for green building without lease premiums is unlikely to hold much appeal for them.