Top Abu Dhabi developer demands 20% fee cuts

Abu Dhabi’s biggest developer, Aldar Properties, is asking consultants for retrospective fee cuts, the latest sign that turmoil in the Middle Eastern markets has spread beyond Dubai.

The state-owned firm is understood to have asked architects and engineers for discounts of up to 20% on jobs that are under way, but where fees have yet to be paid. It is also renegotiating prices for future work. Its projects include £28bn Yas Island leisure resort and Al Raha Beach, the £13bn “gateway to Abu Dhabi”.

Aldar's £13bn Al Raha Beach in Abu Dhabi

The news comes as results of a Building survey suggest that two-thirds of UK firms operating in the Gulf have been asked to cut fees in the past three months.

One architect said: “We’ve received a letter from Aldar telling us it wants better value for money. The cut is in the 20% ballpark.”

Another said Aldar was pushing fees down “because it can” and said his firm was trying to negotiate with the developer. He said: “That work was done with a certain expectation. You can adapt to new fees but you can’t change what you’ve already done. We’re trying to argue our case.”

The head of the UAE division at a third firm said it was reviewing its staff levels on Aldar projects. Earlier this month the developer admitted that it had frozen some schemes, including Foster + Partners’ World Trade Centre.

The news, which follows Abu Dhabi’s $10bn (£7.1bn) injection into Dubai’s ailing economy, will be a blow to those who thought the oil-rich emirate would remain a strong market for UK firms.

The results of Building’s survey shows that confidence in the Gulf is at a low ebb. As well as cutting fees, almost 70% of respondents said their firm had laid off staff in the UAE in the past quarter. Two-thirds said they thought Dubai’s property market would take at least a year to recover.

But the picture was not entirely bleak. Seventeen per cent of respondents said they earned twice as much as they would in the same role in the UK, and a quarter earned 50% more. In total 57% thought working in the Middle East had been good for their career.

Aldar said it would not comment on commercially sensitive matters.