Gundeep Singh, the founder and chief executive of The Change Initiative, beside solar power units on the roof of his store. Jaime Puebla / The National
Gundeep Singh, the founder and chief executive of The Change Initiative, beside solar power units on the roof of his store. Jaime Puebla / The National

Dh73.6 million price tag for Dubai's sustainability store



It cost Dh73.6 million to turn a warehouse in Dubai's Al Quoz area into the city's first sustainability store, The Change Initiative.

The price tag for the concept store, a one-stop destination providing sustainable solutions for the community, business and government, was revealed this month.

The figure emerged weeks after the store was awarded the highest certification - platinum - under the Leadership in Energy and Environmental Design (Leed) international benchmark scheme for green buildings.

Solar power systems, efficient lights, advanced insulation and other green features were installed during the renovation, helping the building to gain 107 out of 110 points under the commercial interiors category of the scheme.

"It was more than a refurbishment, we almost reconstructed the whole building once again," said Gundeep Singh, the company's founder and chief executive.

"We started with the objective of being Leed platinum and we tried to tick every box," he said. "This was not easy, it was very tough."

Of all the technologies utilised in the building, lighting and automation were the biggest costs, said Mr Singh.

The facility relies on efficient but expensive light emitting diodes (LED) for all its illumination.

The building management system, motion sensors and automatic curtains that adjust according to the amount of sunlight and the temperature inside the building also came with a hefty price tag.

The building relies on solar power to provide 40 per cent of its energy and features sustainably-sourced paints, finishes and other materials.

Mr Singh said while the price tag may curb the enthusiasm of other private companies, he did not regret the decision. In terms of operational costs, the store can save 30 to 35 per cent on expenses. Running the shop costs Dh32,000 a month, about 80 per cent of which goes toward energy and water bills.

Investing in sustainability was also important to show The Change Initiative could "walk the talk".

"You can imagine that to create a brand like this, I think US$20 million (Dh73.6m) is not a lot. Now we have a global footprint, people know us all over the world because of what we have done and that matters a lot.

"The building is much healthier, it is iconic in many ways and last but not least, you are talking about a building that reduces its footprint by a significant amount for many years to come."

A little more than a year since the store launched last May, his efforts seem to have paid off with a turnover of Dh17m last year. This year's turnover is expected to be Dh70m, said Mr Singh, who described The Change Initiative as being "on the route to profitability". He expects it to be profitable within a year.

The building's restaurant and the business-to-business area, where lighting, energy, waste and water solutions for corporate and public clients are on offer, have been the most successful aspects of the business.

"The good news is that we have become the hub, so if you want to make a building sustainable, which is necessary today, all the solutions are available here," he said.

The Change Initiative still needs to attract more retail customers, said Mr Singh. "We expected a bit more of retail but our distribution of retail products is doing well," he said, explaining that home deliveries and an e-commerce scheme due to launch next month were steps being taken to boost retail business.

The concept store plans to expand to Singapore, Hong Kong and Doha, although Mr Singh was not able to offer a concrete timetable.

"We have had a lot of learning this year. We really want to do everything right," he said. "I want to make sure we understand our positioning, what people really want, and how do we get this entire proposition to people in a much more interesting way."

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”