Payment delays bite Dubai fit-out firms

Payment delays bite Dubai fit-out firms
Published: 11 June 2019 - 11:31 a.m.

The fit-out and commercial refurbishment market in the UAE is a creative and exciting place to do business, but alarming issues, such as payment delays, are becoming increasingly prevalent, contractors are warning.

Alec Fitout is a division of UAE construction giant Alec and has a variety of five-star luxury hospitality projects in the pipeline. While short timeframes, delayed access to site, and frequent design changes remain ongoing obstacles facing fit-out contractors, the business believes late and even non-payment is becoming an increasingly serious problem.

“Now more than ever, late and non-payment is the biggest issue that is really affecting the supply chain and specialist sub-contractors,” Tom Gilmartin, business development manager, says.

“Careful selection of projects and clientele are very important to ensure that work executed can be paid for in a timely manner. Thankfully at Alec Fitout, and as part of the Alec Group, we have strong financial backing that can see us support a project and our supply chain in the short-term to ensure timely completion.”

Commercial Interior Design’s 2018 Fit-Out Firm of the Year, Depa Group, adds that a cash crunch in the construction market may be trickling down to fit-outs.

“Cost is now a driving factor in this space for the majority of new build projects, which poses significant questions for main contractors and fit-out contractors alike,” Depa Group tells Commercial Interior Design. “Where the interior contractor is not nominated by the client, main contractors are choosing to self-deliver interior works in a bid to enhance their project margins by saving on the additional preliminary costs of an interior contractor. New procurement models being adopted by the major developers also lean towards individual trade contractors – rather than full fit-out – in a bid to reduce the costs,” the company adds.

Depa Group has a solid mix of ongoing GCC fit-out projects, including three jobs at Expo 2020 Dubai – one of which is with renowned Spanish architect Santiago Calatrava, who designed the UAE Pavilion. Its other projects include two “iconic” metro stations in the GCC, one of which was designed by Zaha Hadid Architects, the firm behind Riyadh Metro’s King Abdullah Financial District station.

With a number of important fit-out projects gaining speed across the region, Depa says it is important for businesses to demonstrate value engineering capabilities, as cost remains a key consideration for companies across the supply chain.

“We have noticed that the specifications and/or material selections are not complying with the client’s budgets and thus it’s important that a fully-researched value engineering offer is submitted, giving both the client and consultant options to meet the aesthetic and overall budget,” it adds.

While the purse strings may be being tightened in the region, UK consultancy Cundall, which is working on fit-out projects for Microsoft and PwC, says there has been a “significant increase” in the volume of work.This may be partly because, in the last 24 months, business have been looking to move from older developments to more modern and attractive business hubs, such as Dubai Design District, Dubai World Trade Centre’s One Central Development, and Dubai International Financial Centre.

“We have also seen a change in how clients approach the initial building selection process, with a key emphasis now on how the design team can adapt and address the space to suit things like the working environment, wellness, future flexibility and adaptive office configuration,” it adds.

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