Top 2003 Design Firms
Signs of Stabilizing Emerge in Design
by Craig Barner
The annual Midwest Construction survey of design firms in
Illinois, Indiana and Wisconsin found billings for the top
130 companies in the tri-state region last year were $1.68
billion.
The survey also found that worldwide revenues for the top
design firms were $6.44 billion in 2003.
Steadying as She Goes
The design market is showing incipient signs of stabilizing
after two years of lethargy that included an officially declared
recession in late 2001 and early 2002.
A steadying design market, if strong enough, bodes well for
the building industry as a whole. Positive reverberations could
spread to general contractors, specialty contractors and suppliers.
"We are seeing some signs of recovery," said Dan Sullivan,
strategic and development officer for Chicago-based OWP&P.
"The number of projects, complexity and size has been rising
fairly steadily for the last six months."
With one exception, the interviewed companies say backlogs have
held steady this year or increased.
Indianapolis-based Ratio Architects Inc. has a backlog of six
months of work, said William Browne Jr., president of the firm.
Last year at the same time, backlogs were at three months.
Others have seen noticeable increases, such as Chicago-based
A. Epstein & Sons International Inc.
"We have exceeded by a substantial amount already this
year the backlogs we brought into this year from all of last
year," said John Patelski, the firm's president. Epstein's
prospects are particularly bright because in May it was named
a joint-venture partner in Mc4West LLC, the design-build team
for the $850 million McCormick Place West Expansion at the convention
center south of downtown Chicago.
Also enjoying the expectation of a mega project, Ratio has been
named to receive design work for the $1 billion Midfield Terminal
Development Project at Indianapolis International Airport, Browne
said.
Revenue at Kansas City, Mo.-based HNTB Corp. this year is expected
to increase after two years of flatness, said Becky Cotton Zahner,
vice president and head of Central Region architectural practice
for the firm with a Milwaukee office.
And another signal that the market is getting better is that
while the number of projects is increasing, some are relatively
small, said Robert Graves, chief executive officer of Madison,
Wis.-based Flad & Associates. Owners might be taking baby
steps.
Notes of Caution
Despite the steadying market, the design industry falls short
of the vigor it witnessed during the boom of the 1990s.
Architects are out of work because a number of layoffs occurred
during the economic downturn, said Alice Sinkevitch, executive
director of the American Institute of Architects/AIA Chicago.
And because the recovery is moving slowly, job creation appears
to be limited.
The AIA/Chicago maintains files of resumes and job openings,
and out-of-work architects are using the service more than employers.
The AIA/Northeast Illinois in Naperville also carries a resume
library for members and nonmembers, said Dan Bryan, president.
Ratio's Browne said a concern is that the downturn will mirror
the recession of the early 1990s and result in out-of-work architects
becoming discouraged about their prospects.
"The last recovery took an awful lot of quality people
out of profession for good," he added. "I'm hoping
this recession has not done the same thing. I haven't seen evidence
of that, but I know the impact of it before."
The firm has hired staff since its backlogs started increasing
and continues to interview people even when no specific position
is open.
A potential outlet for unemployed architects may lie in the
single-family residential market. Running counter to the middling
economy, the residential market is booming, said Bryan, whose
firm in Hinsdale, Ill., Bryan Associates, focuses on house design.
"I have never been busier in 17 years," he added.
Like hiring, design-service fees do not appear to be showing
signs of perceptible increases. All interviewed firms say their
charges have not gone up.
Competition is keeping fees low, said OWP&P's Sullivan.
"Some firms get very desperate," he added.
Yet cutthroat as the Midwest design market can be, other locales
might have it worse, said Kenneth Crumrine, president of Chicago-based
Consoer Townsend Envirodyne Engineers Inc., a firm with offices
throughout the country. Downward pressure on fees remains in
markets like the Northeast.
Fee shopping is prevalent among buyers of design services, Flad's
Graves said.
"We always go through these cycles where for a while, it
seems advantageous to go out and get the lowest fee for the
project," he added. "Then they go through the cycle
where they're not happy with the service."
And, buyers of design services are holding onto their money.
"Our aging accounts have gone up," OWP&P's Sullivan
said.
Taking Action
Responses among design firms to the market are varied.
OWP&P is considering expansion into new markets and geographical
locations, Sullivan said.
An increase in marketing and improvements to project delivery
are planned at A. Epstein & Sons, Patelski said.
The lack of a large hiring push has resulted in more sharing
of employees among Consoer Townsend Envirodyne's different operations
than ever, Crumrine said.
Trending Up
Trends are being watched so opportunities for design can be
seized.
Collegiate sports facilities, for example, are seeing a lot
of focus because they represent revenue-generating facilities
for schools, said HNTB's Cotton Zahner. Some of these aging
facilities - Purdue University's Ross-Ade Stadium and the University
of Wisconsin's Camp Randall Stadium - are large.
Design work to improve airport security is under way. And increasing
travel means convention centers are looking to expand.
In Indiana, infrastructure design has increased significantly
for Consoer Townsend Envirodyne, Crumrine said. "Indiana
might be the sleeping giant out there that not many people are
tracking," he added.
And the traditional strongholds of the Midwest - such as university,
medical and transportation - show no signs of abating.
"We're seeing pent-up demand," Flad's Graves said.
"If this confidence is built back up, we'll see a move
forward, probably at a more measured pace than in 2001 and 2002."
Showing Caution
But the architects are a long way away from celebrating because
of certain worrying economic factors.
Deficits at the state level, for example, could affect K-12
school and public works projects. Political factors, such as
the threat of terrorism, can suddenly eradicate even the slightest
signs of market health. And, the overall economy continues at
a slothful pace.
"There are a limited number of major capital programs identified
and being funded," Crumrine said. "To the extent that
firms are involved in these projects will probably affect more
than anything their growth and decline in the next year." |
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