The architectural profession has been greatly influenced by the recession that began over three years ago. With hundreds of projects, on a variety of scales, being stalled or completely canceled, and firms forced to lay off extreme numbers of employees, many estimate that our profession has taken one of the hardest hits of this economic downturn. We are constantly, and optimistically, seeking that metaphorical silver lining to get back on our feet hoping our industry will revive itself. Yet, back in March of this year, the Chief economist for the AIA, Kermit Baker, warned, “We’ve been preaching patience and cautious optimism for a full recovery because there continues to be a wide range of business conditions for architecture firms that are also influenced by firm size, practice specialties and regional location. We still expect the road to recovery to move at a slow, but steady pace.” More after the break.
The latest from the AIA Consensus Construction Forecast panel presents more daunting news as nonresidential construction is still expected to decline close to 5.6 percent this year. Compared to the overall 20 percent downturn of nonresidential buildings last year, the AIA calls this drop “quite modest” and the panel expects a recovery of 6.4 percent in 2012. Plus, the ABI for June of 46.3 marks the third consecutive month which indicates a decrease in billings. The regional breakdown is as follows: West 51.7, Northeast 47.5, South 47.3, and the Midwest 44.6. However, healthcare construction is the only segment expected to see a rise with a projected growth of 1.8 percent. “Momentum is beginning to shift in the nonresidential construction sector, but even after the markets begin to recover, there is a long climb to get back to the levels enjoyed before the recession. Home building generally creates demand for nonresidential facilities, so the extremely weak housing recovery is not generating much demand for new projects. Job growth also is a key factor in creating need for new buildings, and, like home building, an employment recovery has not gotten underway to any significant degree. All of this points to a fairly modest expansion in the nonresidential building sector once growth resumes in late 2011 or early 2012,” explained Baker. In late June, the AIA announced an interesting initiative to develop a database for stalled projects. Such a network would allow potential investors to finance projects, a move that would greatly uplift our industry which has suffered from the lack of available loans even for “credit-worthy” projects as we reported in the ABI Report for April. Last spring, according to the WSJ, the percentage of stalled construction sites rose 12% since last winter, with Manhattan’s rate soaring to an increase of 40%! The AIA states that such a database will provide the opportunity for projects that are specifically stalled due to lack of financing to move forward. “We are committing to developing this database not just with the fortunes of architects in mind,” said AIA President Clark Manus, FAIA. “In large part the fortunes of the entire U.S. economy rest on the jobs-creating potential of the design and construction industry, which accounts for $1 in $9 of U.S. Gross Domestic Product, according to the U.S. Census Bureau.” “For months, our industry has continued to suffer solely because banks won’t lend,” Manus said. “With this innovative, unprecedented commitment, the AIA has decided to step up and do something about that.”