Savills, the leading global real estate advisors, hosted an exclusive webinar on the occasion of the launch of its global Impacts study in the Middle East. The third and latest edition of the report is dedicated to the topic of tipping points, which examines the key issues that will shape the future of the real estate industry in the Middle East and beyond. Steven Morgan, CEO Savills Middle East, said: "Savills Impacts report is one of our flagship global studies. It comes at the right time following the global pandemic, which impacted all the key sectors of the economy around the world. Pandemic aside, there are other threats such as climate change, trade wars and embargoes to an ever-changing regulatory landscape that have been influencing the business landscape. "Our research aims to look at how widespread economic, social, environmental and technological upheaval is changing the world of real estate. As Middle East investors are navigating through a period of uncertainties, our thought leadership sheds light on asset classes that we believe will prove the most attractive opportunities for them." Richard Paul, head of professional services and strategic consultancy, Savills Middle East added: "Over the past decade, the MENA region has been a key source of capital into global real estate markets, and this trend is only set to accelerate. "A forecasted prolonged period of low oil price will require regional governments to continue to work on their diversification strategy, which will undoubtedly gather more momentum and see sovereign wealth and private institutions seek opportunities in other markets outside of their own." According to Savills, on a global level, over $225 billion of institutional capital, has been raised in 2019 to invest in global real estate markets, with most of these funds having a preference to acquire assets across Asia, Europe and North America. The opportunity for Middle East markets to capitalize on this growing appetite is huge with currently $5.8 trillion worth of regional projects in the planning or in the construction phase. Middle East key takeaways Climate change and real estate (including smart buildings, MMC, food and water security) Real estate can make a huge different to tackle some of the issues related to climate change. For instance, the building and construction sector accounted for 39% of carbon emissions in 2018. Sectors emissions increased by 2% from 2017 to 2018 globally. Global building stock is also set to double by 2050, as more people are forecast to be living in cities. Since, the Middle East, especially Saudi Arabia, UAE and Egypt will witness strong growth in construction, the use of modern construction techniques and adoption of smart building technologies can open a new field of exciting opportunities for improving building performance and also on enhancing customer experience. Another key trend in this area is ‘vertical farming', also known as controlled environment agriculture (CEA), which currently tops the popularity chart of agri-tech concepts emerging in the region and especially in Dubai. Given the UAE imports close to 85% of all its food, this technology would allow the country to become less dependent on imports and lead the way in food security and self-sufficiency. Real estate is likely to be among the biggest beneficiary of this growing trend. Savills Dubai Industrial Report 2019 highlighted that the emergence of new concepts such as ‘cloud kitchens' and ‘vertical farming' has had a positive impact on warehousing demand in Dubai. Trade wars and risks While the world is engaged in an ongoing discussion about the ramifications of the trade war between Washington and Beijing, the economies of the Middle East are witnessing increasing investments from China — a move that may have long-term implications for the economic and political dynamics of the region. Between 2014-2017, the Middle East's total belt and road (BRI) funding was $71.1 billion, with Egypt being the largest recipient. In Oman, China is key to the country's plans to develop its industrial zones and has pledged to spend $10.7 billion by 2022 in Oman's Duqm special economic zone. China has much of what the region needs, whether through its private sector in technology-related fields, state-owned conglomerates in infrastructure and construction, or state-sponsored financing vehicles. We can only expect this trend of strengthening China-MENA relations to continue, especially as the BRI expands further in the region. Transports and innovations Given that governments in the region made technology and smart systems a key component of their investment plans, vehicle automation, high-speed Hyperloop capsule delivery and airborne drone transport are poised to disrupt the sector and may soon become the new normal. Transport is the second-largest planned projects sector in the Middle East with KSA and the UAE leading the way. As technology begins to transform how goods are distributed and stored, real estate decisions may change. Developments in the Middle East have to future proof themselves as the region will continue to witness increased investments into large scale infrastructure projects. COVID-19 Implications It is one of the greatest tipping points of our lifetimes and the impacts it will have on the global economy is being fiercely debated. Most forecasters agree that there will be a global recession deeper than the global financial crisis (GFC) and many expect it to be the deepest since the Second World War. The debate is around the shape of the recovery. Will there be a V-shaped rebound? Or is a U, L or W shape more likely? We're even hearing discussions about ‘a Nike swoosh-shaped' recovery. As countries continue to come out of their strict lockdowns but social distancing is still encouraged, the long-term impact of COVID-19 is yet to be seen. Many believe the world will emerge as a different place. Following the release of the Impacts report, Savills team of experts will start engaging in the coming weeks in a series of webinar panel discussions with regional and international-based industry leaders who will deeper dig into regional specific impacts, how these are affecting real estate and our future. — SG
