Sustainability, Fairness and Competitiveness. The Real Estate Market and the 2030 Economic Vision of Bahrain

TABLE OF CONTENT

LIST OF ABBRIEVIATIONS

LIST OF ILLUSTRATIONS

LIST OF APPENDICES

ABSTRACT

AKNOWLEDGEMENTS

DECLARATION

INTELLECTUAL PROPERTY STATEMENT

CHAPTER 1: INTRODUCTION
1.1 BACKGROUND
1.2 BAHRAIN’S 2030 ECONOMIC VISION
1.3 ROLE OF REAL ESTATE IN MEETING THE VISION
1.4 RESEARCH SHAPE, SCOPE & STRUCTURE
1.4.1 Parameters of the Report
1.4.2 Aims
1.4.3 Objectives
1.4.4 Research Questions
1.4.5 Division of Report, following this chapter

CHAPTER 2: LITERATURE REVIEW
2.1 AN OVERVIEW ON THE REAL ESTATE MARKET IN BAHRAIN
2.1.1 Contributing & Limiting Factors, and the Role of Government
2.1.2 The Real Estate Market: An Overview of the Sectors
2.2 REVIEW ON PRINCIPLE ONE: SUSTAINABILITY
2.2.1 Definition of Sustainability
2.2.2 Theories of Sustainability
2.2.3 Sustainability in the Real Estate Context
2.2.4 Considerations of Sustainability Factors in Mature Real Estate Markets vs Bahrain
2.3 REVIEW ON PRINCIPLE TWO: FAIRNESS
2.3.1 Definition of Fairness
2.3.2 Theories of Fairness
2.3.3 Fairness in the Real Estate Context
2.3.4 Fairness in Mature Markets vs. the Bahraini Market
2.4 OVERVIEW ON PRINCIPLE THREE: COMPETITIVENESS
2.4.1 Definition of Competitiveness
2.4.2 Theories of Competitiveness
2.4.3 The Advantages of Having a Competitive Market
2.4.4 Factors Affecting Real Estate Competitive Attractiveness for FDI
2.4.5 Competitiveness in the Real Estate Context
2.4.6. Competition in Mature Real Estate Markets vs. Bahrain

CHAPTER 3: METHODOLOGY
3.1 INTRODUCTION TO RESEARCH DESIGN
3.2 RESEARCH PHILOSOPHY
3.3 RESEARCH STRATEGY
3.4 ADVANTAGES AND DISADVANTAGES OF CHOSEN RESEARCH METHOD
3.4.1. Advantages
3.4.2. Disadvantages
3.6 THE INTERVIEW PROCESS
3.6.1 Format of Interviews
3.6.2. Interview Sampling Strategy
3.7 RATIONALE FOR INTERVIEW PARTICIPANTS
3.7.1 Conducted Interviews

CHAPTER 4: FINDINGS & DISCUSSION
4.1 INTRODUCTION
4.2 GENERAL INTERPRATATIONS ON THE REAL ESTATE MARKET IN BAHRAIN
4.3 UNDERSTANDING/ADAPTING THE VISION
4.3.1 General Awareness
4.3.2 The Suitability, Importance & Contribution of the Vision
4.3.3 A Common Interpretation: The Need for a Plan
4.4 ADAPTING TO PRINCIPLES WITHIN THE VISION
4.4.1 Rating the Principles
4.4.2 Perceptions on Sustainability in the Bahraini Real Estate Context
4.4.3 Perceptions of Fairness in the Bahraini Real Estate Context
4.4.4 Perceptions of Competitiveness in the Bahraini Real Estate Context
4.4.5 General Sense/Ideology

CHAPTER 5: CONCLUSION
5.1 RECOMMENDATIONS

APPENDICES

BIBLIOGRAPHY

LIST OF ABBRIEVIATIONS

Abbildung in dieser Leseprobe nicht enthalten

LIST OF ILLUSTRATIONS

A. Tables:

Table 1: Parameters of the report Table 2: Report outline

Table 3: Comparison of rankings

Table 4: Type of market segment of those interviewed

Table 5: Positions held for those interviewed within their organisations Table 6: Frequency of votes per rates on the position held for principles

B. Charts:

Chart 1: The Average rating per principle based on voted of interviewees

LIST OF APPENDICES

Appendix 1: Quick Highlights on the Kingdom of Bahrain

Appendix 2: An Overview on the Gulf Cooperation Council (GCC)

Appendix 3: Land Cover Change in Bahrain from 1987-2013

Appendix 4: Change in the Build Up Area in Bahrain from 1987-2013

Appendix 5: Definitions of Arbitration and Mediation

Appendix 6: SWOT Analysis

ABSTRACT

Real state, amongst key market sectors, can be described as the backbone to an economy, whereby it comprises of the infrastructure where all other sectors can operate. Therefore, in the design of a national vision, real estate becomes the base for progress and economic development. This research paper investigates the contribution of the real estate market towards meeting the three main principles of the 2030 economic vision set by the Kingdom of Bahrain.

To start, an overview of Bahrain’s current market conditions is provided, as per collected secondary data, with a particular focus on real estate activities. Following the market overview is a detailed study of the concepts of sustainability, fairness, and competitiveness, as they form the base principles of the Bahrain economic vision. The study included the pertaining theories for each concept, followed by an application of how they would manifest in the real estate context. Finally, a comparison is devised between the actualisation of such principles in mature markets versus Bahrain, with a highlight of gaps and overlapping practices, where applicable.

To follow, primary data gathered through interviews with prominent real estate practitioners in Bahrain, shows the perceptions on real estate trends and the implementation of the vision principles, confirming a notable gap between current and potential market conditions. Reasons for these gaps have been explored within the interviews and as based on literature reviews, addressing both the limitations and opportunities for the prosperity of the real estate sector.

Finally, the concluding chapter suggests real estate practices which could bridge such gaps, towards achieving market fairness, sustainability, and competitiveness. The objective here is to further enable the role of the real estate sector as a major contributor to national wealth and meeting the ambitions of the 2030 Economic Vision, which aim to diversify the economy away from oil dependency, enhancing productivity, and improving living standards.

Key Words: Bahrain, Vision, Real Estate, Sustainability, Fairness, & Competiveness.

AKNOWLEDGEMENTS

I would like to express my sincere appreciation and gratitude to both my supervisor Mark Shephard and the course advisor Selma Carson for their unwavering support, guidance and advice.

I would also like to extend my thanks to all the professionals that agreed to take part in my research, for their precious time and insights that have helped enrich this research paper. This paper would have been incomplete without their contributions and assistance.

I am profoundly indebted to my parents, siblings and cousins for their understanding, morale support, and help in proof reading and providing insight for the paper. Without their continuous encouragements, it would have been impossible to excel in my studies.

DECLARATION

No portion of the work referred to in the dissertation has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning

INTELLECTUAL PROPERTY STATEMENT

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iii. The ownership of certain Copyright, patents, designs, trademarks and other intellectual property (the “Intellectual Property”) and any reproductions of copyright works in the dissertation, for example graphs and tables (“Reproductions”), which may be described in this dissertation, may not be owned by the author and may be owned by third parties. Such Intellectual Property and Reproductions cannot and must not be made available for use without the prior written permission of the owner(s) of the relevant Intellectual Property and/or Reproductions.
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CHAPTER 1: INTRODUCTION

1.1 BACKGROUND

Today’s globalised economy has forced countries to ‘compete’, as they either rise with, or drown under the waves of international developments. Thus, nations are compelled to set a ‘vision’ where they would be able to meet internationally recognised standards and receive favourable global rankings for Gross Domestic Product (GDP), social living standards, attractiveness for Foreign Direct Investment (FDI), and Intelligent Infrastructures, among many others.

Yet, attaining a national vision is highly complex, especially in developing countries where economies are yet to reach optimum efficiency. Accordingly, a nation ought breakdown the components of its economy to assess their contribution, and address the needed development of such components; the real estate sector is included in this break down. This paper shall use the definition of real estate as identified by (Mouzughi, Bryde & Al-Shaer, 2014, pg. 1), as “The economy’s stock of buildings, the land on which they are built, and all vacant land. These buildings are used either by firms, government, non-profit organisations and so on, as workplaces, leisure service providers or by households as places of residence”. Therefore, real estate may be viewed, in its singularity, as a country’s largest tangible asset; afferming its fundamental role within national wealth.

Thus, this paper shall focus on the role of the real estate sector where nation visions are concerned, and illustrate how real estate development is prominent and instrumental in creating opportunities conducive to global success. The kingdom of Bahrain shall be used as the case study to explore this topic. (Appendix 1 highlights key facts on Bahrain).

1.2 BAHRAIN’S 2030 ECONOMIC VISION

In 2008, H.M. King Hamad Al-Khalifa launched Bahrain’s 2030 Economic Vision, with the following aspirations (Fact Sheet, 2013):

“ To shift from an economy built on oil wealth to a productive, globally competitive economy, shaped by the government and driven by a pioneering private sector - an economy that raises a broad middle class of Bahrainis who enjoy good living standards through increased productivity and high-wage jobs.

Our society and government will embrace the principles of sustainability, competitiveness and fairness to ensure that every Bahraini has the means to live a secure and fulfilling life and reach their full potential ”

The vision highlights the private sector as instrumental to national growth, and clearly recognises the government’s role as an enabler. However, research shows that there was no issued national plan to achieve the vision.

1.3 ROLE OF REAL ESTATE IN MEETING THE VISION

Real estate, in a broad-spectrum, designates the built environment, which is fundamental in every aspect of the economy, society and environment (EPRA, 2013). Studies indicate that real estate, in all its forms, practices and usages, accounts for approximately 20% of any economic activity (EPRA, 2013). All social and business dimensions can only function with the availability of multiple forms of real estate including offices, shops, factories, housing and others. Therefore, in developing regions, like the Arab Gulf, real estate can be a main contributor in addressing critical contemporary challenges, such as building urban environments capable of standing out in the international market.

Over the past ten years in Bahrain, the real estate market has contributed multi-billion pounds worth of developments to several sectors. The kingdom witnessed an increase in residential properties, commercial centres, shopping malls and leisure amenities, besides other landmark mega projects developed on man-made islands including: Durrat Al Bahrain, Amwaj, and others. According to the Survey and Land Registration Bureau (SLRB), the overall trading in the real estate sector has reached about GBP 1.6 billion from January to late September 2014 (ArabianIndusty.com). Market figures show that the value of property deals hiked by 44% during the first half of 2014 compared to the same period in 2013, while domestic and foreign investments in the kingdom were valued at about GBP 78 billion, with the biggest portion of these investments directed to the real estate sector (BMI, 2014).

According to Mouzughi, Bryde & Al-Shaer (2014), the focus of those developments was to meet economic sustainability and competitiveness criteria, further reducing the kingdom’s dependency on oil. Yet, real estate and its related sectors such as infrastructure and construction contribute to about 5% of Bahrain’s Real GDP (Economic Development Board -EDB). In comparison to Dubai, as specified by his Highness Shaikh Mohammed bin Rashid, 68.6% of the city’s GDP is none reliant on oil and mainly from real estate and tourism (Gulf Digital News). Despite the increased activity, Bahrain still has substantial unreached potential, especially for real estate (EPRA, 2013, pg 1).

This raises the question of how was Bahrain employing real estate developments, and were they properly targeted to contribute to economic growth, and achieve major goals of the vision: moving away from oil dependency, enhancing productivity & improving living standards.

1.4 RESEARCH SHAPE, SCOPE & STRUCTURE

1.4.1 Parameters of the Report

Abbildung in dieser Leseprobe nicht enthalten

1.4.2 Aims

- Investigate ways in which the Bahrain real estate market can contribute to the 3 main principles of the 2030 Economic Vision.
- Explore the gaps in the market in terms of those principles.
- Understand the perceptions of important market players/influencers on the vision principles, current market conditions, and the prospects to bridge market gaps.

1.4.3 Objectives

- Investigating how sustainability, fairness and competitiveness manifest themselves in the real estate context.
- Detecting the current state of the Bahrain real estate market.
- Labeling the important practices of international mature markets that contribute to the 3 principles, in comparison to practices in Bahrain.
- Gathering the perceptions held by market influencers on the key issues in Bahrain real estate, and the practicality of adopting mature market practices.
- Identifying feasible recommendations that would support the actualisation of the vision principles, if applicable.

1.4.4 Research Questions

- What do the vision principles mean in the real estate context: sustainability, fairness and competitiveness?
- What is the state of real estate market in Bahrain today, and how are the vision principles administered within?
- What are the best practices/alternative approaches that could contribute towards meeting the vision according to literature and market practitioners?

1.4.5 Division of Report, following this chapter

Table 2. Report Outline

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CHAPTER 2: LITERATURE REVIEW

2.1 AN OVERVIEW ON THE REAL ESTATE MARKET IN BAHRAIN

Bahrain’s real estate sector has been in recovery mode since its 2011 political outbreak, especially following the 2008 financial crisis. Real estate financing became increasingly difficult, with real estate projects slowing in construction or completely stopping, while completed projects face financial distress; “Investors could not sell completed developments as property values plummeted and a potential exit would have yielded losses” (Plate, Engels & Schmid, 2013, pg.1).

However, political stability is slowly gained due to growing economic conditions through government activations for infrastructure projects, support to diverse business sectors, and legislation reviews. In accordance to the report issued by the Bahrain Economic Development Board (EDB), the kingdom’s GDP growth reached 4.5% in 2014, while non-oil sectors jumped to 4.9% in 2014, from 3% in 2013 (EDB Report, 2015). “Improving sentiment has helped lift confidence levels among investors and developers, now making a slow but steady return to the market” (Sambidge, 2014, pg.3).

Hence, political and economic improvements may propel the re-launch of the real estate market; where the general trend may be described as either stagnant or moving upwards, but no longer declining.

2.1.1 Contributing & Limiting Factors, and the Role of Government

The government takes on a major role when it comes to both supporting and straining the prospects for real estate in Bahrain. For example, the government commissions projects for infrastructural and housing developments, where lifestyle standards are upgraded as a natural byproduct. In addition, the Central Bank of Bahrain has adopted some of the ailing real estate Projects, providing financial and structural support for rejuvenation (BMI, 2014). Furthermore, the government is in process of improving the legislative structure of the real estate market, including rental laws, brokerage acts, and registration regulations, towards organising the market and stretching its legislative flexibility. “Organising the market through flexible and deterrent laws will develop the market’s rank” (BMI, 2014).

Yet regardless of current efforts, regulations for real estate are still immature, where the kingdom scores 48 in freedom from corruption (IOEF, 2015), and according to the Index of Economic Freedom (2015) the kingdom currently holds a score of 60 out of 100 on property rights. Hence, the current structure is hardly conducive and limited in many aspects; and while there are aspirations for improvements, clear solutions are still pending (Clayson, 2010).

There are also major market players notably influencing sectoral trends. These include major Banks whose main activity is in financing real estate projects or developing projects themselves. Examples includes AlSalam Bank with its subsidiary Amlak, and Kuwait Finance House who’s the main developer of “Durrat AlBahrain”- the 2nd biggest artificial development on the island to date. Additionally, there are prominent investors, both local and expatriate, who have the capacity for influencing the market, such as the individuals who invested in Amwaj, the floating city, which is the biggest artificial development in Bahrain.

There are factors, which do not include government and market player involvement, influencing real estate and the country’s general economic progress. To start, the location of Bahrain is ideal and central, especially having the King Fahad Causeway connecting it directly to Saudi, and the Gulf. The traffic flow accounts for more than 50,000 vehicles daily, increasing over 100% on weekends and public holidays; averaging to 1.5 million vehicles crossing the bridge per month, and translating to more than 15 million people annually (xrdarabia.org, gulfnews.com & aawsat.net). Furthermore, a second parallel causeway in the pipeline shall answer to the growing commuting population, along with the awaited causeway connecting Bahrain to Qatar. This is mainly prompted by Bahrain's attractive lifestyle and business culture, being lenient and progressive, while the cost of living is low in comparison to the rest of the Gulf, making it appealing for families, businesses, and Saudi’s expatriate employees to base themselves in Bahrain, and operate out of the island. Additionally, Bahraini laws allow Gulf Cooperation Council (GCC) nationals full ownership of real estate in all areas, and non-GCC nationals in some, thus increasing the baseline for demand substantially. A profile of the GCC is found in Appendix 2.

Furthermore, Bahrain is an attractive destination for FDI. According to the 2015 index, Bahrain’s economy is ranked 18th freest worldwide. “Impressive long-term improvements in financial, investment, and labor freedoms have helped the kingdom to transform itself into a competitive trade and financial hub that leads the region in many areas” (Heritage, 2015, pg.1). Another feature increasing the eligibility of Bahrain for FDI is the general cost and ease of doing business. Dubai and Qatar, although with a booming and stronger economy, respectively cost 35% to 46% more for running a business (KPMG, 2014). “Bahrain offers asset and wealth managers a specialist support infrastructure, low costs and a large financial services workforce. It is ranked as the 15th lowest cost location for business in the world” (EDB Report, 2014).

While real estate supporting factors seem abundant, there are also major hurdles to the market, the main being land access and prices. Bahrain is facing severe land scarcity, covering an area of 741.1 square kilometres only. Developers, the government included, felt compelled to expand via landfills to over 75km to date, as shown in Appendix 3. This, along with other factors to be investigated during the course of this paper, cause inflated land prices; land costs in Bahrain average 60% of total development cost, where the international benchmark is only half of that (Plate, Engels & Schmid, 2013).

That being said, the density of developments in Bahrain had been mostly focused north of the island, given that the south was restricted by the government for oil and gas explorations (Mousughi, Bryde and Al-Shaer, 2014). These explorations are now mostly cleared, and the government has already launched the issuance of some land plots for varying developments including residential, medical, and hospitality services (GDN.com). Yet, it could take a while for the developers to find the south as desirable as the north, given population density, existing infrastructure, and a more sought-after pace of life. The progress of the build up area within the kingdom is evident in Appendix 4.

2.1.2 The Real Estate Market: An Overview of the Sectors

Each sector of real estate is experiencing differing growth trends. In terms of the residential sector, different areas and types of developments have varying success trends; generally dependent on the inhabiting demographic. For example, towns like Amwaj, Juffair, and Saar experience steady demand due to growing expatriate communities. Developments in such areas are built according to the lifestyle particulars of the community; however supply has surpassed demand, due to market conditions and the regional economy -oil price trends included, which has adversely caused a general stagnancy in rent (Cluttons Report, 2015). Ironically, the market for affordable housing for Bahraini nationals is experiencing the opposite, where supply only answers to 20% of current demand (BMI, 2014). While the government has issued projects for building 5 new towns in Bahrain to encompass government housing, the capacity to satisfy the demand is still questionable (Morgan, 2013). Meanwhile as the Industrial and Oil sector in Saudi grows, recruiting more expatriates, the residential market in Bahrain gains. (Morgan, 2014; Gulf Daily News, 2013).

The commercial sector is suffering the most in Bahrain’s real estate; while developers insist on building large floor plates, the demand for commercial space is limited to under 250sqm, thus the sector has seen a decline estimated at 7% in 2013 (KPMG, 2014), and 6% in 2014, but with no further decline since the start of 2015 (Cluttons). However, the negative sentiment for the commercial sector may take a new turn in the coming years as political and economic stability is further cemented, especially in consideration that rental rates for commercial spaces in Bahrain are on average half than in neighboring Dubai and Qatar (KPMG, 2014).

Meanwhile the Retail sector is expanding, as reflected in the rate of take up of units across the kingdom. Malls are springing in all urban areas, quickly attracting international retailers; for example, the Dragon mall in Amwaj pre-let 60% of its units 6 months before expected completion (Cluttons Report, 2015) The resilience of the retail sector is supported by the increasing expatriate population, and weekly influx of GCC residents who enjoy Bahrain’s lower hospitality rates (Gerrity, 2014).

Hospitality real estate trends after the Retail sector, having seen an overall expansion rate averaging 10% year on year (EDB Report, 2015). “More hotels are expected to be inaugurated in the coming period after the high rates of tourists inflow and the high occupancy rates of 5 star hotels rising over 50% during 2014” (BMI, 2014).

2.2 REVIEW ON PRINCIPLE ONE: SUSTAINABILITY

2.2.1 Definition of Sustainability

Kuhlman and Farrington (2010) have defined ‘sustainability’ as the aptitude or capacity of something to be maintained or to sustain itself. Sustainability as a policy concept originates from the 1987 Brundtland Commission, addressing the disparity between the ambitions of mankind, with the limitations forced by nature (UNECE.com). The Brundtland Report (1986, pg. 43) created a simple definition for sustainability now extensively quoted worldwide as the notion of “meeting the needs of the present without comprising the ability of future generations to meet their own needs” (iisd.com).

2.2.2 Theories of Sustainability

According to Kates, Anthony & Leiserowitz (2005), sustainability consists of three pillars, also known as the Triple Bottom Line (TBL) as named by John Elkington in 1994; encircling issues to do with people, planet and profit (Fisk, 2010). The three-pillar model comprises of environmental, economic and social aspects of sustainability, which together form the basis of a sustainable system. Correspondingly, the concept of “sustainable development” has emerged to help understand and restore the equilibria amongst these (Lozano, 2008).

The environmental pillar emphasises interest towards protecting the natural world (Daly and Cobb, 1989). This includes actions taken to avoid climate change, protecting the earth’s biodiversity, and using available natural resources sparingly (United Nations, 2013). In other words, society must learn to live within the limitations of the environment, and consume natural resources only within their regeneration rates (Goodland, 2014).

The economic pillar mostly relates to business and industry, with the idea that economic resources should be utilised responsibly and efficiently; hence projects only with guaranteed returns should be invested in, and risks must be better weighed by company officials. It also considers the aspect of job creation as a core of economic sustainability, where money earned is spent, helping businesses expand, thus creating more jobs and ensuring a robust money distribution cycle. An emerging concept for economic sustainability is that of ‘natural capital’; it states that economists need to also add into the equations of economic input the consumption of natural resources, such as air, water, land, etc, by at least acknowledging their value within economic cycles (Goodland, 2014). The inevitable depletion and harm to such sources means that ‘clean air’, may one day come at a price.

The last pillar relates to the social aspect of sustainability, generally speaking, “the social pillar examines social relationships, interactions and institutions that effect, and are effected by, sustainable development” (Daly H E, 1992). It focuses on the notion of satisfying human needs whilst answering to long term social demands, further expressed as the “ability of a society to function at a definite level of social well being indefinitely” (McKenzie, 2004). The level should be outlined towards enhancing the quality of life for current and future generations. However, there are general disagreements on what quality of life goals are, due to differing political priorities, religions, cultures, and classes.

The reports conducted on sustainable development in developing countries, dictate that the environmental aspect is truly under threat. This point is further detailed in the World Economic and Social Survey report, stating that efforts being made to improve the environmental aspect of sustainability are insufficient (United Nations, 2013). Still, even in cases where entities apply pillars of sustainability, the solutions often focus on pillars separately, making the proposed solutions incomplete in their nature. For instance, environmental NGOs, the United Nations Environmental Programme (UNEP) and the environmental protection agencies focus exclusively on the environmental pillar; while the World Trade Organisation (WTO) and the Organisation for Economic Cooperation and Development (OECD) concentrate on the economic pillar and are exclusive to some social aspects like war and justice. Hubert R. (2011) argues that pillars of sustainability are interrelated and conditional, where for instance pollution influences population health, and thus levels of productivity and economic activity. Therefore the solution to general sustainability means addressing the discussed pillars inclusively.

Elkingdton, J. (1997) confirms that the three elements of the TBL are sturdily interlinked, and overcoming challenges for sustainable development should encompass adopting the three elements simultaneously. Yet, he also confronts the complexity of understanding their interactions; while partial integration is better than none. Hence “shear zones” are identified as legible interfaces, where specific conflicts may be derived from two pillars combined. For example, where social and environmental challenges cross, the “shear zone” subscribes to environmental injustice as environmental adversities are experienced unevenly between social classes; the more socially and financially privileged generally suffer less from ecological degradations, such as having better access to cleaner water. There is a multitude of examples of “shear zones”, when reviewing partial integrations, and while this does not solve all issues of sustainability, it perhaps serves as one step closer to inclusive solutions.

Overall, it is found that conducting theories of sustainability provides insight into the global efforts required to be made, in a realistic targeted manner. Thus, it is vital that theories are acknowledged to keep sustainability in check and ensure continuous improvements.

2.2.3 Sustainability in the Real Estate Context

According to the theories reviewed and the gained understanding of sustainability, its application in real estate must also consider the three discussed pillars of environmental, social, and economic sustainability, separately and ‘partially’ combined. The most common consideration would be for economic sustainability; an active and developing real estate market means increased employability both in vertical and horizontal markets. This is then followed by spaces developed for a diversity of industries to operate, where employment opportunities increase, propagating economic and social well being.

In the case for social sustainability within real estate, it is necessary to acknowledge that real estate practices directly affect social make up. For example, poor urban planning may dictate the segregation of social classes via quality and condensation of construction, selectivity of amenities, and accessibility to lifestyle options. This means that urban planning approaches can inject bigger gaps between social classes, which counters financial and social sustainability.

When it comes to environmental sustainability, the role of real estate is rather vital. For example, a sustainable practice would be for developers to consult with environmentalists when choosing a location for development, in consideration of construction affects on the existing ecosystem of chosen land locations. The second requisite is the sustainability of construction design, material, and technology for building environmentally considerate structures, and avoiding scenarios where nature is over-ridden. In addition, there are practices of environmental sustainability, such as the application of renewable energy to power developments, which are yet to gain global popularity to become enforced by policies.

In accordance to the TBL theory, and the consideration of “shear zones”, as indicated by Elkingdton, J. (1997), the process of pursuing sustainable real estate practices means aiming to understand how specific approaches may affect multiple requirements for sustainability. For example, while real estate developments answer to the needs of an exponentially growing population and benefits social welfare, it often simultaneously obliterates natural resources, equally essential for the sustainability of the growing population. When resources become scarce, their distribution becomes more uneven leading to acute social injustices. Meanwhile, the application of natural energy source, such as solar and turbine energies could answer positively to all of financial, social, and environmental sustainability; a simplified equation can be laid out as per the following: in the long term, when money is saved by using natural energy to power a hospital’s electricity, carbon emissions are lessened thus reducing pollution, and the same money being saved in this process can then be redirected to enhancing hospital facilities.

Hence, sustainability in the real estate context means applying real estate planning, design and development in a way which equally considers long term social, financial, and environmental responses, to that of immediate urban demands.

2.2.4 Considerations of Sustainability Factors in Mature Real Estate Markets vs. Bahrain.

With the pressure of studies on global warming confirming that 40% of CO2 emissions are from built environments among others, sustainability as a notion has spread across media, and received concentration in a series of international reports. The United Kingdom (UK), besides other mature markets, have responded to such attention by assembling public commitments to sustainability (Dent, Patrick and Xu, 2012). These are devised of a series of sustainability matrices including building certifications such as BREEAM, LEEDS, Green Star, CASBEE and BREEAM-in-Use ratings (Green Property Allience, version 1, 2010). Carbon footprint reduction commitment schemes, Energy Performance Certificates (EPCs) and Global real estate Sustainability Benchmarking (GRESB) also exist (TaylorWessing.com). Those metrics could give information about a property’s energy use, energy costs and recommendations on ways to reduce energy use, which enables saving money. Meanwhile, the Energy Act 2011 is proposing to ban buildings with F or G rated EPCs and has three principle objectives: (1) tackling barriers to investment in energy efficiency (2) enhancing energy security and (3) enabling investments in low carbon energy suppliers (Dent, Patrick and Xu, 2012 pg. 71).

Furthermore, the BSRIA report by James Parker on the value of BREEAM provides evidence on the growing demand for sustainable designs and schemes. The scheme that has assessed and certified thousands of buildings was perceived by 88% of respondents as “positive”. This is possibly one of the drivers for implementation, where over half of the local authorities in England have a BREEAM requirement as part of their local development framework (Parker, 2012).

According to the Survey of Corporate Real Estate (SCRE) lead by JLL and CoreNet (2011), sustainable buildings were in fact favoured. For instance:

- 65% considered sustainability as a critical business issue;
- The number of respondents prepared to pay more for green leased space jumped from 37% in 2009 to 50% in 2010 & 48% were ready to pay a 10% premium for sustainable space.
- 87% consider energy labels in administering their portfolios;
- 48% are collecting sustainability data & 49% are presently employing sustainable related workplace strategies.

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