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Masdar adapts its strategy to leaner times

17 March 2010
When Abu Dhabi's Masdar City was conceived in 2006 during an economic boom, its planners took a page from the clean energy industry and designed a city that would be carbon-neutral, large scale and lucrative.

Four years later, Masdar officials have unveiled a new strategy for building the city at a time of reduced demand for property, incorporating lessons learnt about the limits of clean energy and transport technology.

"The master plan was set in stone about four years ago. The world has changed quite a bit since then and we have learned more about how to do it," said Alan Frost, the director of Masdar 's property development unit.

"It is a phased project. Not everything is going to drop down on day one."

Masdar City, one part of the larger Masdar Initiative, will look different. Some planned villas will be scrapped in favour of more efficient apartment buildings and many commercial spaces will be larger.

But most important, the new plan will turn Masdar from a builder into a master developer, leaving some of the risk and construction to third parties.

The end result the company hopes for - at least in the short term - is a smaller, more sustainable development with less emphasis on futuristic technology but a better chance of meeting the needs of the market.

At the heart of the new thinking is the change in the property market.

When Masdar unveiled detailed plans for the city with a ceremony in early 2008, property prices were climbing and rapidly rising oil prices pointed to a bright future for alternatives.

The city attracted global attention with plans for a US$22 billion (Dh80.79bn) development that would house 50,000 people by 2016 and would serve not only as a grand experiment in future technology, but also as a commercial venture that would help diversify the economy away from fossil fuel exports.

But starting last summer, executives at Masdar determined some assumptions would have to change. Crucial elements such as energy sources and transport technologies were reconsidered.

Demand for residential space has changed, as tenants prefer two or three-bedroom flats to the villas originally planned. At the same time, some commercial renters asked for larger spaces.

Masdar aims to finish the first stage by the end of 2013, Mr Frost said.

"Initially, the view probably was that we were the developer of the whole city ... in reality it's more making use of the other very capable developers," he said. "It doesn't make sense for a company like Masdar to replicate Aldar, for example."

Up to now, Masdar had played a major role in the construction process, a strategy that was less efficient and increased costs, Mr Frost said.

Part of the challenge was the rigorous standards the company maintains for carbon-neutral building materials, he said, which meant it had to look to local suppliers to reduce their own carbon output when making materials such as glass and aluminium cladding. Imports often had a higher carbon footprint because they needed to be shipped long distances from overseas.

"It's part of our mission to upskill some of the people we're working with in terms of the quality of their work and the stuff they're doing," Mr Frost said. "I think a lot of this stuff, at least initially, it's certainly been more expensive."

The shift in strategy was "very sensible", said Steven Morgan, the head of the Dubai office of the property consultancy Cluttons. "What they are looking to do is perfectly reasonable and more in line with property developers internationally," Mr Morgan said. "Over the life of an investment, these kinds of projects need to make a good return."

additional reporting Bradley Hope

By Chris Stanton

© The National 2010