After three years of slow but continuing improvement, architecture and engineering (A&E) firms are healthier now than at any time since the start of the great recession, according to initial findings of the 2013 Architectural and Engineering Study from DiCicco, Gulman & Company LLP (DGC), a CPA and business consulting firm specializing in the A&E profession.
This soon-to-be released survey benchmarks financial performance and other key indicators based on input from over 40 architecture and engineering firms headquartered in the greater Boston area. The study, conducted annually, contains some of the most comprehensive financial data available on the A&E industry.
“Most firms are doing better than they did in 2011,” says Chad DaGraca, a partner in DCG’s A&E practice. While the report shows a 2.6% increase in profits, perhaps more significant is the fact that firms also increased hiring, made investments in infrastructure and saw continued growth in the volume of their business. “These are signs of a true recovery,” DaGraca says.
One reason for the improvement is renewed activity in the private sector. Many companies—including a good number of the Fortune 500—have been loosening their purse strings and investing in new buildings and facilities. “Companies are spending money because they have more confidence in the overall direction of the economy,” he says.
At the same time, the residential housing market has stabilized and is improving in certain markets across the country. With more work to be found in the housing sector, firms that were forced to bid on other types of projects are increasingly returning to their normal line of work.
While competition remains stiff, there are clear signs of easing within the industry. The average billing multiple, for example, rose again in 2012, increasing to 3.12 from 3.08 in 2011. “The pricing pressure in the marketplace is loosening up,” DaGraca says. “Most firms would still characterize the competition as significant, but there is certainly more work to be had. This will also shift more and more emphasis towards focusing on best practices in the area of project management; as firms begin to grow again, they will need to ensure their projects are profitable in this competitive environment.”
Likewise, the utilization rate, which is the percentage of time worked on billable projects, rose slightly to 65.3%, putting it above 65% for the first time since the recession.
While the survey focuses on 2012 data, responses indicate that 2013 will likely show continued improvement, DaGraca says. Another indication of continuing industry growth, he says, is the AIA's Architectural Billings Index, which has reported growth in design firm billings for eight of the last nine months. “We are still not back to pre-2008 levels, but we are moving in the right direction, says Dave Sullivan, partner in DGC’s A&E practice.”
As A&E firms gain strength, Sullivan expects to see many firms tackling long-range strategic initiatives such as succession planning, the impact of industry consolidation, and staff development. Staffing, for example, is getting increased attention as firms try to make sure that they have people with the right skill sets in the right positions. Employees are also beginning to look for new opportunities as the job market eases. Turnover has been relatively low over the past two years, but that will change in 2013, so firms need to be prepared for those changes and have a plan in place to attract and retain good people.
“Industry consolidation and succession planning will continue to be among the leading challenges for the industry in 2013”, says Sullivan. “The recession has put more pressure on the demographic shift in firm ownership created as the baby boomer generation heads to retirement. Firm owners need to plan early to execute a successful succession plan and to achieve their longer term ownership goals for the firm. This is not an easy task as many firms will attest to.” The DGC 2013 Architectural and Engineering Study, which will be available this summer, highlights the firm’s expertise and in-depth knowledge of the architecture and engineering professions. DGC experts analyze financial data from prominent firms in the Greater Boston region, focusing on operational performance metrics and identifying emerging trends.
About DiCicco, Gulman & Company LLP
DiCicco, Gulman & Company LLP (DGC) is a CPA and business consulting firm specializing in A&E firms, as well as private clients, real estate and commercial business. As an independent member firm of Moore Stephens North America, DGC has access to a global network of technical expertise and best practices, which result in elevated performance standards. For more information please visit www.dgccpa.com or call 781-937-5320.
Related Stories
Architects | Dec 14, 2020
2021 AIA Gold Medal awarded to Edward Mazria
The Gold Medal honors an individual whose significant body of work has had a lasting influence on the theory and practice of architecture.
Healthcare Facilities | Dec 10, 2020
The Weekly show: The future of medical office buildings, and virtual internship programs
This week on The Weekly show, BD+C editors spoke with leaders from SMRT Architects and Engineers and Stantec about the future of medical office buildings, and virtual internship programs
Multifamily Housing | Dec 4, 2020
The Weekly show: Designing multifamily housing for COVID-19, and trends in historic preservation and adaptive reuse
This week on The Weekly show, BD+C editors spoke with leaders from Page & Turnbull and Grimm + Parker Architects about designing multifamily housing for COVID-19, and trends in historic preservation and adaptive reuse
Giants 400 | Dec 3, 2020
2020 Science & Technology Facilities Giants: Top architecture, engineering, and construction firms in the S+T sector
HDR, Jacobs, and Turner head BD+C's rankings of the nation's largest science and technology (S+T) facilities sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 Laboratory Facilities Sector Giants: Top architecture, engineering, and construction firms in the U.S. laboratory facilities sector
Affiliated Engineers, HDR, and Skanska top BD+C's rankings of the nation's largest laboratory facilities sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 Industrial Sector Giants: Top architecture, engineering, and construction firms in the U.S. industrial buildings sector
Clayco, Jacobs, and Ware Malcomb top BD+C's rankings of the nation's largest industrial buildings sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 Convention Center Sector Giants: Top architecture, engineering, and construction firms in the U.S. convention center sector
AECOM, Gensler, and Jacobs head BD+C's rankings of the nation's largest convention center sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 Reconstruction Sector Giants: Top architecture, engineering, and construction firms in the U.S. building reconstruction and renovation sector
Gensler, Jacobs, and STO Building Group head BD+C's rankings of the nation's largest reconstruction sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 K-12 School Sector Giants: Top architecture, engineering, and construction firms in the U.S. K-12 school facilities sector
AECOM, Gilbane, and PBK head BD+C's rankings of the nation's largest K-12 school facilities sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.
Giants 400 | Dec 3, 2020
2020 Sports Facilities Sector Giants: Top architecture, engineering, and construction firms in the U.S. sports facilities sector
Kimley-Horn, Mortenson, and Populous top BD+C's rankings of the nation's largest sports facilities sector architecture, engineering, and construction firms, as reported in the 2020 Giants 400 Report.