flexiblefullpage

HORIZONTV FEATURING BD+C: WATCH EPISODES ON DEMAND AT HORIZONTV

Menu View Full Menu
Subscribe Here
billboard
interstitial1
catfish1
Currently Reading

In an era of mixed signals, architects embrace cautious optimism [2013 Giants 300 Report]

In an era of mixed signals, architects embrace cautious optimism [2013 Giants 300 Report]

Are architecture firms finally pulling out of the doldrums? The answer is a tentative yes, according to AIA Chief Economist Kermit Baker.

By Robert Cassidy, Editorial Director | July 15, 2013
Inspired by Arizonas iconic canyon formations, the Health Sciences Education Bu
Inspired by Arizonas iconic canyon formations, the Health Sciences Education Building at the Phoenix Biomedical Campus brings together health sciences education and research programs from the University of Arizona College of Medicine-Phoenix and Northern Arizona University. The Building Team included CO Architects (executive and design architect); Ayers Saint Gross (associate architect); and DPR Construction and Sundt Construction (joint GC).
This article first appeared in the BD+C July 2013 Issue issue of BD+C.
Continue Reading
Are architecture firms finally pulling out of the doldrums? The answer is a tentative yes, according to AIA Chief Economist Kermit Baker, PhD, Hon. AIA.
 
Baker points to the AIA’s Architecture Billings Index, a leading economic indicator of construction activity that reflects the approximate nine- to 12-month lag time between architecture billings and construction spending. The ABI experienced its first drop in nine months last April (to 48.6), but bounced back in May to 52.9 (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.1, up slightly from the reading of 58.5 in April.
 
“This rebound is a good sign for the design and construction industry and hopefully means that April’s negative dip was a blip rather than a sign of challenging times to come,” says Baker.  “But there is a resounding sense of uncertainty in the marketplace—from clients to investors and an overall lack of confidence in the general economy—that is continuing to act as a governor on the business development engine for architecture firms.”
 
On a regional basis, the Northeast (at 53.7), West (52.1), and South (50.9) were still positive, while the Midwest lagged, at 47.5. Multifamily residential remains strong, at 52.8, as do institutional (52.2) and mixed practice (51.0), but the commercial/industrial sector is still hurting, at 47.5.

TOP ARCHITECTURE FIRMS

2012 Total Revenue ($)
1 Gensler $807,143,550
2 Perkins+Will $360,300,000
3 NBBJ $187,017,000
4 Kohn Pedersen Fox Associates $153,821,100
5 Perkins Eastman $145,000,000
6 Callison $134,112,565
7 ZGF Architects $107,412,274
8 Corgan $85,377,040
9 Populous $84,000,000
10 HMC Architects $77,986,678
 

TOP ARCHITECTURE/ENGINEERING FIRMS

2012 Total Revenue ($)
1 Stantec $467,254,421
2 HOK $406,780,000
3 HDR Architecture $325,900,000
4 Skidmore, Owings & Merrill $281,686,000
5 IBI Group $252,552,343
6 HKS $240,300,000
7 RTKL Associates $202,823,000
8 Cannon Design $202,000,000
9 SmithGroupJJR $166,600,000
10 DLR Group $116,400,000
“All the roadblocks are easing a bit, but they’re still they’re,” says Baker. “Financing is still a big problem, and banks are still hesitant to make a real estate loan. They’re still gun-shy, so they’re setting the bar high for loan approvals.”
 
SEVERAL SECTORS STILL CLICKING
Looking more closely at specific sectors over the next three years, Baker sees vacancy rates for apartments increasing, from 5.0% today to 5.2% in 2015, and rental rates declining, from 3.8% now to 2.8% in a couple of years—in other words, somewhat negative fundamentals for the multifamily sector.
 
    Giants 300 coverage of Architecture Firms brought to you by Sage www.sageglass.com    
Similarly, revenue per available room at hotels is expected to drop from a high of 6.8% in 2012 and 5.5% currently, to 5.0% in 2014 and 2015. But occupancy rates should remain steady, in the 63% range.
 
Overall, Baker foresees positive fundamentals for several key sectors. The office market should witness declining vacancy rates, from 15.4% in 2012 to 13.6% in 2015, and improved rental rates increases, to 4.0% over the next two years, from 3.5% today. Ditto for retail and industrial/warehouse, where market fundamentals also look positive through 2015, in Baker’s analysis.
 
As for the healthcare sector, the AIA economist says that, in his opinion, the Affordable Care Act can only benefit construction of new facilities. “With 30 or 40 million more Americans coming on to the system, it’s hard to come up with a scenario that’s bad for healthcare construction,” he says. “You’ve got to increase it.”
 
As for education, Baker says he wonders if universities are going to be able to keep up the construction wars for fancy new student unions, recreation centers, and the like. “The little echo boom demographic bubble has passed, and institutions are going to have to be more reasonable” in what they can afford to build, he says. In the K-12 arena, Baker says many schools that were built in the ’60s and ’70s may have to be replaced, whether or not the demographics support the case.
 
GOOD TIME FOR DESIGN FIRMS TO GET INTO ACTION
What do all these numbers mean to architecture firms, whether a boutique or midsize emerging firm, or a Giants300 market leader?
According to Baker, larger firms survived the downturn the best. “We heard a lot of stories of clients trading up, getting big firms to do work for them, firms that wouldn’t have bothered with such clients in the past,” he says.
 
Baker sees the possibility of more consolidation in coming years. “The classic case was the big engineering/architecture firm buying up an architecture firm to broaden the base of its offerings,” says Baker. He thinks more alliances may also be formed in years ahead—an East Coast firm that’s strong in the education sector linking up with a West Coast healthcare leader, for example, to strengthen their overall positions in the national market.
 
Baker, who has been through his share of recessions in his 28-year career as an economist, remains optimistic about the profession of architecture. “I do think it’s a great time to be in the profession, and if you own a firm, you’re going to see modest to firm growth in the next few years.”
 
The downside risk of taking aggressive action has begun to diminish, says Baker. His advice to management of architectural firms: “To the extent that they’ve been thinking about doing something for a while—opening a new office in a promising geographic market, making an acquisition—this is probably a good time to pull the trigger.” 
 

Read BD+C's full Giants 300 Report

Tags

Related Stories

Global green building alliance releases guide for $35 trillion investment to achieve net zero, meet global energy transition goals
Green | Jul 8, 2024

Global green building alliance releases guide for $35 trillion investment to achieve net zero, meet global energy transition goals

The international alliance of UK-based Building Research Establishment (BRE), the Green Building Council of Australia (GBCA), the Singapore Green Building Council (SGBC), the U.S. Green Building Council (USGBC), and the Alliance HQE-GBC France developed the guide, Financing Transformation: A Guide to Green Building for Green Bonds and Green Loans, to strengthen global cooperation between the finance and real estate sectors.

Image by Noel from Pixabay
Codes and Standards | Jul 8, 2024

New York State building code update would ban fossil fuels in new buildings

New York’s Building Code Council is set to include the All-Electric Buildings Act in its 2025 code update. The Act would ban natural gas and other fossil fuels in new buildings. 

Attendees at the AEC Innovate conference on AI in Boston
AEC Tech Innovation | Jul 4, 2024

Caution competes with inevitability at conference exploring artificial intelligence for design and construction

Hosted by PSMJ, AEC Innovate in Boston found an AEC industry anxiously at the threshold of change.

So you want to get published: What’s next?
Building Team | Jul 3, 2024

So you want to get published: What’s next?

In the AEC industry, securing media attention is no longer a niche endeavor but an essential component of a holistic marketing strategy.

Miami's One Twenty Brickell Residences condo tower provides deeded office unit for every buyer. Rendering ARX Creative
MFPRO+ New Projects | Jul 2, 2024

Miami residential condo tower provides a deeded office unit for every buyer

A new Miami residential condo office tower sweetens the deal for buyers by providing an individual, deeded and furnished office with each condo unit purchased. One Twenty Brickell Residences, a 34-story, 240-unit tower, also offers more than 60,000 sf of exclusive residential amenities.

Two-tower luxury senior living community The Mather features wellness and biophilic elements Photo courtesy Mather
Student Housing | Jul 1, 2024

Two-tower luxury senior living community features wellness and biophilic elements

A new, two-building, 27-story senior living community in Tysons, Va., emphasizes wellness and biophilic design elements. The Mather, a luxury community for adults aged 62 and older, is situated on a small site surrounded by high-rises.

Office layout design
Office Buildings | Jul 1, 2024

Mastering office layouts: 5 primary models for maximum efficiency and productivity

When laying out an office, there are many factors to consider. It’s important to maximize the space, but it’s equally important to make sure the design allows employees to work efficiently.

GSA to invest $80 million on smart building technologies at federal properties, Image by Sabine Kroschel from Pixabay
Smart Buildings | Jul 1, 2024

GSA to invest $80 million on smart building technologies at federal properties

The U.S. General Services Administration (GSA) will invest $80 million from the Inflation Reduction Act (IRA) into smart building technologies within 560 federal buildings. GSA intends to enhance operations through granular controls, expand available reporting with more advanced metering sources, and optimize the operator experience.

Amazon, JPMorgan Chase among companies collaborating with ILFI to advance carbon verification, Photo: Pixabay
Sustainability | Jul 1, 2024

Amazon, JPMorgan Chase among companies collaborating with ILFI to advance carbon verification

Four companies (Amazon, JPMorgan Chase, JLL, and Prologis) are working with the International Living Future Institute to support development of new versions of Zero Carbon Certification.

Image by nhicnttcantho from Pixabay
K-12 Schools | Jul 1, 2024

New guidelines for securing schools and community spaces released by the Door Security and Safety Foundation

The Door Security and Safety Foundation (DSSF), in collaboration with Door and Hardware Institute (DHI), recently released of “Are Your Door Openings Secure?.” The document provides guidelines to equip school administrators, building management personnel, and community leaders with a clear roadmap to create a secure and safe environment. 

boombox1
boombox2

Top Articles

native1

More In Category

Adaptive Reuse

Detroit’s Michigan Central Station, centerpiece of innovation hub, opens

The recently opened Michigan Central Station in Detroit is the centerpiece of a 30-acre technology and cultural hub that will include development of urban transportation solutions. The six-year adaptive reuse project of the 640,000 sf historic station, created by the same architect as New York’s Grand Central Station, is the latest sign of a reinvigorating Detroit.

halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021