BUSINESS

Local content to answer growing demand for smart building solutions in the thriving real estate sector

June 06, 2023
Dr. Mohanad Alshaikh, CEO, Johnson Controls Arabia.
Dr. Mohanad Alshaikh, CEO, Johnson Controls Arabia.

The recent market studies share a positive outlook for the real estate sector in the Kingdom, where the local gross domestic product grew by 8.6% in Q3 2022 and by 8.3% by the end of 2022 and is anticipated to level up to 7.3% and 3.2% by 2023 and 2024 consecutively as per the World Bank report and indicators.

Johnson Controls Arabic sources forecast that new real estate opportunities in the commercial and residential segments will double, including the hospitality, residential projects, management and business units, retail, and industrial and logistic segments.

The growing demand and increased focus on infrastructure projects are fueling the positive performance of the real estate sector, as our internal sources estimate the value of projects under construction at over USD 1 trillion, and the currently active local projects form 43% of the active GCC projects. Reports also project significant growth in announced urban construction projects by 699% in Q1 2023 compared to Q4 2022, while hotel rooms are expected to reach 315,000.

All these projects will alter public perceptions and expectations of the industry, which will raise the demand for real estate investments in prominent and strategic locations as well as for high-caliber developments that prioritize sustainability and energy efficiency standards, which are increasingly becoming key factors for industry players, including investors, developers, and suppliers. By 2026, it is anticipated that the Public Investment Fund will have invested more than $10 billion in green projects, and the Saudi government is also investing $2.5 billion in an initiative to increase the contribution of renewable resources to 50% of the total electricity consumption in the Kingdom.

Growing awareness among investors and customers and the high demand for smart buildings is further fueling the real estate industry’s positive outlook, particularly after the announcement of the regional headquarters program that mandates foreign and international businesses that have signed huge deals with the Saudi government to shift their regional headquarters to the Kingdom to continue to implement their local projects. This initiative requires the Kingdom to avail additional buildings that comply with international standards to match the anticipated surge in demand for offices and housing units for staff members and families.

In light of this, the Kingdom is committed to developing smart buildings that adhere to the required international standards and support efforts to create local content and other related real estate activities to increase the industry’s efficiency, trust, and interest of investors. Moreover, future investors understand the value of smart buildings, which have various benefits like lowering operational and maintenance expenses and energy consumption, in addition to the role of implementing smart system technology in boosting the industry’s profit margin and buildings’ resale value. Furthermore, Smart buildings are a key to sustainability, as nearly 40% of global carbon dioxide emissions come from traditional buildings. The Kingdom of Saudi Arabia has previously announced that it aims to reach carbon neutrality by 2060 to comply with its development and environmental plans and enable economic diversification. Thus, this can only be achieved with smart buildings.

Saudi Arabia’s real estate market is expected to witness a surge in demand for smart buildings that address public and private sector players’ needs and aspirations in the areas of reducing cost and increasing efficiency and sustainability in natural resource consumption. Hence, local industry players and solution providers are set to join the rapid growth and development race to grow and enrich non-oil local content in line with international standards and practices.

Solution providers must complement these efforts by actively participating in national programs such as the National Industry Development and Logistics Program to contribute to Vision 2030 goals of localizing the industrial sector, growing exports, and increasing manufacturing facilities.

Johnson Controls Arabia continues to play its significant role in this area by adhering to the highest industry standards while contributing to the local content at its world-class innovative manufacturing complex that currently produces 60% of the company’s total sales, and this figure is expected to grow to 90% by 2025. Today, I can safely state that replacing current solutions with innovative alternatives allows us to guarantee a higher return on investment and achieve our ambitious national goals to cement the Kingdom’s position as a global leader in innovation and sustainability.


June 06, 2023
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