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

Photo by Mary Taylor
K-12 Schools | Feb 29, 2024

Average age of U.S. school buildings is just under 50 years

The average age of a main instructional school building in the United States is 49 years, according to a survey by the National Center for Education Statistics (NCES). About 38% of schools were built before 1970. Roughly half of the schools surveyed have undergone a major building renovation or addition.

New download: BD+C's 2023 Multifamily Amenities report
MFPRO+ Research | Feb 28, 2024

New download: BD+C's 2023 Multifamily Amenities report

New research from Building Design+Construction and Multifamily Pro+ highlights the 127 top amenities that developers, property owners, architects, contractors, and builders are providing in today’s apartment, condominium, student housing, and senior living communities.

The Hampton Roads Sanitation District (HRSD) in Virginia Beach, Va., used LIDAR and BIM technology to develop precise building and equipment data for a planned expansion of its Central Environmental Laboratory. Photo courtesy CDM Smith
AEC Tech | Feb 28, 2024

How to harness LIDAR and BIM technology for precise building data, equipment needs

By following the Scan to Point Cloud + Point Cloud to BIM process, organizations can leverage the power of LIDAR and BIM technology at the same time. This optimizes the documentation of existing building conditions, functions, and equipment needs as a current condition and as a starting point for future physical plant expansion projects. 

courtesy of HED What’s next for data center design in 2024
Data Centers | Feb 28, 2024

What’s next for data center design in 2024

Nuclear power, direct-to-chip liquid cooling, and data centers as learning destinations are among the emerging design trends in the data center sector, according to Scott Hays, Sector Leader, Sustainable Design, with HED. 

DOE launches $2 million prize to advance cost-effective, energy-efficient commercial windows
Windows and Doors | Feb 28, 2024

DOE launches $2 million prize to advance cost-effective, energy-efficient commercial windows

The U.S. Department of Energy launched the American-Made Building Envelope Innovation Prize—Secondary Glazing Systems. The program will offer up to $2 million to encourage production of high-performance, cost-effective commercial windows. 

Suffolk invests in Rugged Robotics
AEC Innovators | Feb 28, 2024

How Suffolk Construction identifies ConTech and PropTech startups for investment, adoption 

Contractor giant Suffolk Construction has invested in 27 ConTech and PropTech companies since 2019 through its Suffolk Technologies venture capital firm. Parker Mundt, Suffolk Technologies’ Vice President–Platforms, recently spoke with Building Design+Construction about his company’s investment strategy. 

Lapis at FIU Bar and Cafe student housing design
Student Housing | Feb 28, 2024

Mary Cook Associates completes interiors for luxury student housing community

Chicago-based interior design firm Mary Cook Associates announced it has completed the interiors of Lapis, a new 1,086-bed off-campus luxury student housing community near Florida International University. 

View of the Colburn Center at the Colburn School from Hill Street and 2nd Street intersection. Courtesy Frank O. Gehry & Gehry Partners, LLP
Performing Arts Centers | Feb 27, 2024

Frank Gehry-designed expansion of the Colburn School performing arts center set to break ground

In April, the Colburn School, an institute for music and dance education and performance, will break ground on a 100,000-sf expansion designed by architect Frank Gehry. Located in downtown Los Angeles, the performing arts center will join the neighboring Walt Disney Concert Hall and The Grand by Gehry, forming the largest concentration of Gehry-designed buildings in the world.

Gordian’s Q1 2024 Quarterly Construction Cost Insights Report
Construction Costs | Feb 27, 2024

Experts see construction material prices stabilizing in 2024

Gordian’s Q1 2024 Quarterly Construction Cost Insights Report brings good news: Although there are some materials whose prices have continued to show volatility, costs at a macro level are returning to a level of stability, suggesting predictable historical price escalation factors. 

Green calculator on Green background. Copy space. Environmental, Social, Corporate Governance.
Sustainability | Feb 26, 2024

GBBN's Inflation Reduction Act Calculator goes live

GBBN has publicly released its IRA Calculator, a tool that helps you understand funding opportunities in the IRA for sustainable design.

boombox1
boombox2

Top Articles

native1

More In Category

Healthcare Facilities

Watch on-demand: Key Trends in the Healthcare Facilities Market for 2024-2025

Join the Building Design+Construction editorial team for this on-demand webinar on key trends, innovations, and opportunities in the $65 billion U.S. healthcare buildings market. A panel of healthcare design and construction experts present their latest projects, trends, innovations, opportunities, and data/research on key healthcare facilities sub-sectors. A 2024-2025 U.S. healthcare facilities market outlook is also presented.

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