Facts and Crystal Balls
On Thursday, August 14, the AIA’s chief economist and occasional prognosticator, Kermit Baker, hopped off the train, just before the blackout. Blithely unaware of what lay in store for us all, he wanted to share preliminary findings from the AIA Firm Survey several weeks before its fall publication. Conducted every three years, the firm survey, compiled with help from McGraw-Hill Construction, has proved to be an invaluable research tool, offering a multidimensional snapshot of the architectural office.
Baker let us in on several key points that should fuel at least a year’s worth of further professional conversation. Obviously, he reported, the recent financial contraction has affected most offices. Architect’s billings have been growing at only about 2 percent per annum, he reported, or just barely keeping up with inflation. No surprises there. However, the number of firms overall declined by 8 percent over the past three years, a meaningful statistic. Are you still in business?
Movement toward the extremes continues: Both large and small firms consumed increasing percentages of the marketplace, with medium size firms feeling the pinch. The big get bigger: Firms with 50 persons or more now account for 60 percent of all architectural revenues. Conversely, the small company can dig its own niche, so to speak, carving out a limited range of targeted offerings for its clients. Clearly, it is becoming increasingly more difficult for the 20-person practice to be all things to all people. The paying customers, it seems, want breadth, heft, or focused expertise.
Ready for a pleasant surprise? According to Baker, we make most of our money doing what we do best. It sounds obvious, but common wisdom has suggested otherwise. Pundits, magazines, consultants, and professional forums have preached diversification of services for a decade, exhorting us to offer everything to our clients from “visioning” to color theory—à la carte. Baker’s research bears out the reverse: Basic design remains the most lucrative, profitable segment of practice, generating 50 percent of the most profitable billings; construction management, the least.
Our heads snapped to when he reported a reversal of fortune. Whereas three years ago, the most newsworthy finding in the survey had been the decline of the single practitioner, this survey found the opposite to be true: an increase in the single-person practice. Who could have predicted that outcome? It raises the question of intent and economics, making us wonder if we have suddenly found our inner Howard Roark, or have we found ourselves on the street in a downsizing sweep, armed with a shingle marked “One size fits all.” We suspect the latter.
Baker and McGraw-Hill Construction’s economic wing agree that the pain many companies still feel masks a real turn for the better: Both the general and the construction economies are slowly veering upward, leading us out of what has been a relatively mild recession. Unfortunately, most firms lack forecasting acumen or deep pockets, basing business decisions on the jobs actually walking through the door—new contracts that provide the necessary collateral for bank loans and paydays—rather than on the more fragile, though very real, hopes for the future.
Baker brought a dose of good news. Having verified that at the core we succeed by pursuing what we love, and encouraging us to build our companies for the better days ahead, he lifted off with the West Wind, downtown, just in time for the blackout. Where he spent the night is anyone’s guess, since even an economist’s crystal ball apparently has its limits. For our part, we gathered up our survival kits, untouched since 9/11, and wandered out into the summer evening, armed with a flashlight, a paper mask, and a whistle. Who could predict what we might encounter on the way home?