From concept to reality: the shift towards net zero real estate

The real estate industry has been actively discussing sustainability for years, but recent developments indicate a significant shift from theory to tangible actions. This transition marks a pivotal moment in the sector's commitment to environmental responsibility, particularly in the United Arab Emirates.

For years, the focus was primarily on incorporating sustainability features into individual projects to achieve emissions reduction. However, the market is now nearing a tipping point, with a notable transition towards organisation-wide initiatives aimed at achieving a true net-zero future. This change has the potential to dramatically reshape the landscape of sustainable real estate, promising much more significant outcomes than those achieved in the past.

Several factors are driving this shift towards true net zero real estate. At the forefront are regulatory pressures, with the UAE government leading by example. UAE has committed to achieving net zero emissions by 2050, becoming the first country in the Middle East to make such a pledge. This commitment has set a precedent for the real estate sector to follow suit.

However, regulatory pressures are not the sole catalyst for change. Occupier demands are playing a crucial role, with major global corporations becoming increasingly discerning in their choice of premises. The growth of green finance is another significant factor, as is the mounting evidence that more sustainable developments can command rental premiums while achieving lower operating costs.

As we look to the future, many sustainability initiatives considered "nice to haves" will likely become "must haves" within the next decade. The combination of regulatory pressures and tenant preferences will likely penalise poorer-performing projects, potentially rendering them unfit for purpose.

The concept of "true net zero" is gaining traction. The United Nations defines it as "Net Zero means cutting of greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests for instance." While there have been concerns about "greenwashing" in the industry, there is little doubt that a genuine commitment to achieving net zero emissions represents a sound business strategy that benefits the environment, community, and developers alike.

The UAE has implemented several building sustainability initiatives as part of its climate action plans, including the Dubai Clean Energy Strategy 2050, which incorporates targets for improving energy efficiency in buildings. In the UAE’s third Nationally Determined Contribution (NDC 3.0), the country has committed to reducing the building sector related emissions by 79% by 2035 from 2019 baseline. While there is no specific net zero pathway for existing buildings, the International Energy Agency's global roadmap recommends that in general, 20% of existing buildings should be retrofitted to zero-carbon-ready levels by 2030, increasing to 50% of the stock by 2040. The ultimate goal is to have all buildings zero-carbon-ready by 2050, covering both new constructions and retrofits. These targets are global recommendations, and individual countries may adopt different timelines based on their specific circumstances.

A great example of a robust sustainability strategy is Aldar's organisation-wide approach, which integrates traditional asset-specific emissions reduction initiatives and a broader portfolio-wide strategy to achieve true net-zero emissions. The developer has identified eight actionable levers that guide its coordinated decarbonisation efforts across all development and investment activities, progressively reducing emissions throughout the lifecycle of all assets. These levers include low-carbon design and sourcing, green construction, clean energy, resource efficiency, support for tenant initiatives, sustainable acquisitions, and an emphasis on the circular economy within real estate. For instance, the Haven project, a large master-planned community in Dubai, the first Fitwel Community in the Middle East and Africa to receive a 3-star accreditation, has also achieved LEED Cities and Communities Gold certification. The master plan incorporated a wide array of sustainability strategies to reduce greenhouse gas emissions by 65.5% compared to LEED minimum requirement, using low-carbon materials and implementing green design initiatives.

Community-level initiatives at Haven include incorporating solar panels, achieving 100% e-waste recovery and 80% dry and organic waste recycling, installing EV charging stations in the public parking area, focusing on walking and cycling infrastructure, and allocating 20% of the total site area to parks and open spaces. These features demonstrate how developers translate sustainability theory into practical, tangible benefits for residents and the environment.

While much of the focus on sustainable real estate has been on the corporate, hospitality, and education sectors, there are now emerging initiatives in the residential sector. Since residential development constitutes the majority of all real estate, these initiatives have the potential to significantly reduce the carbon footprint over the next decade.

A major game-changer on the horizon is the potential emergence of a sustainability premium in the residential market, mirroring what is currently evident in the commercial sector. Dubai's Rental Star Rating, launched on 2nd January 2025, serves as an excellent example of this trend. It aligns property values more closely with environmental performance, potentially accelerating the transition to more sustainable urban development. Once sustainable residential designs begin to yield enhanced financial returns, private developers are likely to emulate their larger government-backed rivals in the design and delivery of more sustainable projects.

Although we may be at an early stage in delivering truly net zero residential real estate, the recent shift from theory into practice is a welcome development. This transition offers the potential to dramatically accelerate the rate at which the UAE can reduce carbon initiatives in line with its net zero ambitions.

As the real estate industry in the UAE continues to evolve, the emphasis on sustainability is becoming increasingly ingrained in development practices. The commitment to net zero emissions is not just an environmental imperative but also a sound business strategy that promises long-term benefits for developers, occupiers, and the broader community.

The journey towards true net zero real estate in the UAE is gaining momentum, driven by regulatory pressures, market demands, and a growing recognition of sustainable development's financial and environmental benefits. As more developers embrace this shift and translate sustainability theories into practical applications, the UAE's real estate sector is poised to play a significant role in the country's broader net zero ambitions, setting a benchmark for sustainable development in the region and beyond.

We partner with our clients to deliver end-to-end sustainability services, guiding them from strategy to action in order to achieve sustainability goals, deliver net zero, and add value to their real estate assets. Contact us to learn how we can assist you.