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

Massive work-live-play development opens in LA's new Cumulus District
Mixed-Use | Jun 29, 2023

Massive work-live-play development opens in LA's new Cumulus District

VOX at Cumulus, a 14-acre work-live-play development in Los Angeles, offers 910 housing units and 100,000 sf of retail space anchored by a Whole Foods outlet. VOX, one of the largest mixed-use communities to open in the Los Angeles area, features apartments and townhomes with more than one dozen floorplans.

A building with glass windows.
Multifamily Housing | Jun 29, 2023

5 ways to rethink the future of multifamily development and design

The Gensler Research Institute’s investigation into the residential experience indicates a need for fresh perspectives on residential design and development, challenging norms, and raising the bar.

Coworking space at the Common at National Landing, formerly WeLive: WeWork, in Crystal City, VA
Office Buildings | Jun 28, 2023

When office-to-residential conversion works

The cost and design challenges involved with office-to-residential conversions can be daunting; designers need to devise creative uses to fully utilize the space.

Sutton Tower, a new 80-story residential high-rise in Manhattan’s Midtown East neighborhood Photo: David Joshua Ford, courtesy Lendlease
Multifamily Housing | Jun 28, 2023

Sutton Tower, an 80-story multifamily development, completes construction in Manhattan’s Midtown East

In Manhattan’s Midtown East, the construction of Sutton Tower, an 80-story residential building, has been completed. Located in the Sutton Place neighborhood, the tower offers 120 for-sale residences, with the first move-ins scheduled for this summer. The project was designed by Thomas Juul-Hansen and developed by Gamma Real Estate and JVP Management. Lendlease, the general contractor, started construction in 2018.

Why architects need to think like developers, with JZA Architecture's Jeff Zbikowski
Architects | Jun 27, 2023

Why architects need to think like developers, with JZA Architecture's Jeff Zbikowski

Jeff Zbikowski, Principal and Founder of Los Angeles-based JZA Architecture, discusses the benefits of having a developer’s mindset when working with clients, and why architecture firms lose out when they don’t have a thorough understanding of real estate regulations and challenges.

Average U.S. apartment rent reached all-time high in May 2023, at $1,716 - Image by edvaldocostacordeiro from Pixabay
Apartments | Jun 27, 2023

Average U.S. apartment rent reached all-time high in May, at $1,716

Multifamily rents continued to increase through the first half of 2023, despite challenges for the sector and continuing economic uncertainty. But job growth has remained robust and new households keep forming, creating apartment demand and ongoing rent growth. The average U.S. apartment rent reached an all-time high of $1,716 in May.

HKS-designed HALL Arts Residences Dallas 4.jpg
Apartments | Jun 27, 2023

Dallas high-rise multifamily tower is first in state to receive WELL Gold certification

HALL Arts Residences, 28-story luxury residential high-rise in the Dallas Arts District, recently became the first high-rise multifamily tower in Texas to receive WELL Gold Certification, a designation issued by the International WELL Building Institute. The HKS-designed condominium tower was designed with numerous wellness details.

The value of open space on higher education campuses
University Buildings | Jun 26, 2023

Addition by subtraction: The value of open space on higher education campuses

Creating a meaningful academic and student life experience on university and college campuses does not always mean adding a new building. A new or resurrected campus quad, recreational fields, gardens, and other greenspaces can tie a campus together, writes Sean Rosebrugh, AIA, LEED AP, HMC Architects' Higher Education Practice Leader.

Photo by Dreamlike Street on Unsplash
Standards | Jun 26, 2023

New Wi-Fi standard boosts indoor navigation, tracking accuracy in buildings

The recently released Wi-Fi standard, IEEE 802.11az enables more refined and accurate indoor location capabilities. As technology manufacturers incorporate the new standard in various devices, it will enable buildings, including malls, arenas, and stadiums, to provide new wayfinding and tracking features.

The Green Proving Ground program will evaluate an energy storage technology from Yotta Energy that is the size of a large laptop and installed in place of ballast beneath a rooftop photovoltaic system.
Green | Jun 26, 2023

Federal government will spend $30 million on novel green building technologies

The U.S. General Services Administration (GSA), and the U.S. Department of Energy (DOE) will invest $30 million from the Inflation Reduction Act to increase the sustainability of federal buildings by testing novel technologies. The vehicle for that effort, the Green Proving Ground (GPG) program, will invest in American-made technologies to help increase federal electric vehicle supply equipment, protect air quality, reduce climate pollution, and enhance building performance.

boombox1
boombox2

Top Articles

native1

More In Category

Urban Planning

The magic of L.A.’s Melrose Mile

Great streets are generally not initially curated or willed into being. Rather, they emerge organically from unintentional synergies of commercial, business, cultural and economic drivers. L.A.’s Melrose Avenue is a prime example. 

Curtain Wall

7 steps to investigating curtain wall leaks

It is common for significant curtain wall leakage to involve multiple variables. Therefore, a comprehensive multi-faceted investigation is required to determine the origin of leakage, according to building enclosure consultants Richard Aeck and John A. Rudisill with Rimkus. 

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