Regarded as one of the world’s leading interior contractors, Depa Group has delivered some of the most complex projects including the globe’s tallest tower Burj Khalifa, Atlantis the Palm and the 7 star hotel Burj Al Arab.
With an impressive pipeline of fit-out projects, one of Depa’s main markets for the Middle East is based in Saudi Arabia as it taps the huge demand of work for the kingdom’s built environment.
Depa’s history in Saudi Arabia dates back 12 years ago when they established a full time office in the kingdom, but had previously delivered projects in the country.
Speaking exclusively to Construction Week, Depa Group’s director Abdoullah Albizreh says that they have contributed to the Saudi Arabia construction sector by setting a “high benchmark” in industry standards.
“Our work has materialised due to expanding our client base in KSA and past performance of successfully delivering similar projects in the kingdom,” says Albizreh. “We have been in talks with new key clients and we have carefully selected them for the last 16 months, providing construction intelligence and advice before the tender is released to help clients with their developments in the region.”
He added: “KSA and the UAE are the two biggest markets in the GCC and they account for more than 50% of the construction sector in the region. We have recently refocused the business on the core competencies and key geographies whilst implementing a robust risk management plan. We identified UAE and KSA as our two main markets.”
Delving into the details of fit-out works within Saudi Arabia, Depa has completed and is currently in talks with some of the most prominent developments in the country.
“Depa is helping the kingdom with its social and economic infrastructure developments including two iconic metro stations: KAFD metro, which is designed by Zaha Hadid, and Olaya Metro,” explains Albizreh.
“Depa is also delivering two hospitality projects with Hilton and five cinemas to help KSA diversify its economy away from an oil based economy. We are tendering a number of projects with the Public Investment Fund (PIF), KAFD, Kempinski Hotel, Intercontinental Hotel, four cinema operators, and are in talks with Qiddiya, Amaala and Diriyah Gate.”
Expanding on its fit-out works with cinema operators, Muvi Cinemas, which is Saudi Arabia’s first homegrown cinema brand, awarded Depa the contract for the complete fit-out and MEP works at five cinema projects, comprising 39 screens in the kingdom in February 2020.
The contract, which includes three cinemas in Riyadh (a total of 16 screens), one in Jeddah (17 screens), and one in Buraydah (6 screens), will cover a total area of 15,854m2.
The project will be designed by London-headquartered architects and masterplanners Chapman Taylor, and will be managed by Dubai-based Compass Project Consulting.
The contract award was revealed exclusively to Construction Week at the time, and Albizreh says that the procurement and shop drawing development is almost completed.
“We have mobilised to four cinemas and initial works have been completed including demolition, scaffolding, floor self-levelling, stadia design and fabrication and constructing the warm shell.”
Commenting on the growing entertainment infrastructure in Saudi Arabia, Albizreh believed that this sector was “booming” and there is a race for market share among investors to build a cinema or entertainment centre in each location before the competition does.
“Unlike many other sectors, investors in the entertainment sector are finding that their business plans have a high return on investment and are easier to fund by lenders,” Albizreh explains.
“There are huge developments in this sector as investors are finding it attractive, there is a huge demand by the end user, and still not enough competition. Banks are supporting these developments and there is a race to grab market share.”
Despite the successes for Depa in Saudi Arabia’s construction market, Albizreh admitted that it hasn’t come without its challenges.
“The main challenge in Saudi Arabia is that clients are appointing main contractors to do the fit out works. Unlike the UAE, the interior fit out package is a provisional sum nominated to the main contractor by the client to ensure quality and cost.”
He added that clients awarding main contractor fit out packages is not part of contractor’s expertise and they are trying to educate and recommend the provisional sum model as clients and hotel operators are not achieving the desired quality of interiors.
“Clients need to look at financial institutions to fund their projects and not contractors. Clients that issue a tender state that the advanced payment is 10% with an accelerated program.
“For a company like Depa, which employs thousands of in-house labour and has its own manufacturing facilities, construction is not an issue with the available resources, but getting material to site for this large labour force to work on is critical.
“Suppliers demand 30-50% advanced payment, which means most projects are in negative cash flow for the contractor until the end of project.”
In addition, these are not the only challenges that Depa has faced as the Middle East construction industry is witnessing unprecedented times from the COVID-19 pandemic.
“We are developing mitigation plans to minimise delays as I believe this will be inevitable for projects. This will mean that we have to re-forecast our projected revenue in KSA, and we might have to work double shifts once the curfew is over to make up some of the lost productivity of shorter working hours,” Albizreh admitted.
“We are taking measures of checking everyone’s temperature every day before entering the sites or office.
“We have set new mandatory regulations by increasing distance between office employees, providing masks and gloves for workers, inductions for drinking water regularly and washing hands every hour, installed wall sanitisers of working to make sure our employees are safe, and our sites are not contaminated with the virus to ensure business continuity and minimise business disruption.”
Although times are uncertain at the moment for Saudi Arabia, Albizreh concluded that the construction sector can grow tremendously over the coming years.
“We have already witnessed an increased workload in the construction sector due to the Vision 2030 agenda, which is acting as a driver for activity in the country.
“Unlike other markets, KSA is not saturated, the kingdom does need more cinemas and more hotel rooms, especially in Makkah and Medina. During 2019, 193 new construction, 190 manufacturing and 178 ICT companies were established, compared to 111, 113 and 111 in 2018 respectively.”
He added: “Saudi Arabia needs theme parks and they do not have a metro system yet, and most airports are overdue for an upgrade. The challenge is for the kingdom to ease regulation, which has started and has had a very positive effect. We need to find finance through investors and lenders to make sure these huge plans or projects are delivered, which might be more challenging than we think.”
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