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Architecture Billings Index Climbs by Two Points in July

Commercial/industrial sector reports growth for third consecutive month

Summary: Although billings at architecture firms declined for the 30^th consecutive month in July, the ABI score increased by nearly two points from the previous month, inching closer to 50. In addition, business conditions continue to improve at firms with a commercial/industrial specialization, despite persistent weakness in the general economy. Survey panelists report that the design phase for nearly half of their projects lasts for less than six months, and that the complexity of the project is the most important influence on the length of that design phase.

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The AIA’s Architecture Billings Index (ABI) score for July inched closer to the 50-point threshold again (a score higher than 50 is an indication of growth), climbing nearly two full points from June to 47.9. While there is growing optimism that billings may grow in the near future, business conditions at many architecture firms remain tenuous, with relief still a long way off.

Inquiries into new work have grown for 16 of the last 17 months, but this month’s score of 53.1 is the lowest since the beginning of the year. However, this may represent a leveling out of the glut of RFPs that firms have been receiving in recent months that have not translated into actual billable work.

Business conditions remain weak at architecture firms in all regions of the country. Firms in the Northeast continue to report the highest scores, but they have been weakening every month since very minimal growth was reported in April. The score increased in the South for the fifth month in a row in July, and is approaching 50 for the first time in more than two years.

Firms with a commercial/industrial specialization reported growth for the third month in a row in July, and while it remained minimal, it is still a positive sign. The highest score in nearly two years for that sector was reported at firms with an institutional specialization, amid reports that building projects funded under the stimulus program are beginning to wrap up.

The most recent issue of the Federal Reserve’s Beige Book reports that, for the most part, the commercial and industrial real estate market remains weak in all regions of the country. However, while vacancy rates in many areas are flat or increasing, office/retail leasing actually has been increasing in New York City. Construction activity continues to weaken in the Atlanta, Minneapolis, Dallas, and Cleveland, but public infrastructure construction is on the rise in Chicago, and most Federal Reserve Board districts anticipate slow growth in commercial/industrial real estate in the near future. And, employment data continues to paint a mixed picture. While overall nonfarm payroll employment declined by 131,000 positions in July, the private sector continued to add jobs, with an additional 71,000 positions. Construction employment remains relatively flat, shedding just 11,000 jobs in July.

This month’s special questions followed up on last month’s questions about the timing of project design phases. Survey respondents reported that the largest share of their projects (42%) have a design phase (defined as lasting from the awarding of the design contract to the completion of the construction documents) that lasts less than six months, while an additional 24% of projects have a design phase typically lasting between six and nine months. Small firms are much more likely to have shorter design phases than large firms, with 59% of projects at firms with less than $250,000 in annual billings having design phases of less than six months, compared to just 23% of projects at firms with annual billings of $5 million or more. Projects at firms with an institutional specialization also tend to have a slightly longer design phase, with nearly half (47%) of projects at those firms having a design phase lasting between six and 12 months.

Our panelists indicated that the complexity of a project is the most important influence on the length of the design phase, followed by project size (construction value), type of client, and scope of design services offered. The project delivery method (e.g., design-build, design-bid-build, integrated project delivery) was not considered to be a very important factor.

To View Additional Charts click here.

Article via AIA.org

8 Occupations With Increased Demand

6. Production
7. Construction and Extraction
8. Healthcare Support

The Bottom Line
Online job postings have increased in almost every sector according to Monster’s Employment Index, with computer, education and office and administrative jobs also seeing double-digit percentage growth. So what does this mean for our economy? What’s important to note about Monster’s numbers is that mining, manufacturing and transportation and warehousing are the industries showing the largest growth – with mining seeing an impressive 53% gain since 2009. Any economic analyst will tell you this means an increase in production, a possible early indicator of economic recovery. Good news, even if you’re not looking for a job.

View all 8 ocupations via Financial Edge

Design Fees: Self-Inflicted Losses

Via ARCHITECT
By: Ernest Beck

The second installment of our series on architectural fees finds that increased competition for even the smallest of projects is leading firms to slash rates. But have things gone too far?

When a major New York financial institution asked three architecture firms to submit bids for a high-end office renovation last year, it was a relatively small project, but one that was eagerly sought by the bidders to keep revenue flowing in tough times. What transpired reflects the cutthroat nature of the industry these days: Two firms came in at around $175,000, while the third offered a bargain-basement price of $100,000, according to one of the participants, who asked to remain anonymous to protect client confidentiality.

Not surprisingly, the low bidder won, prompting an angry response from one of the other bidders. “If we went in at $160,000, it would have been low-balling—and dangerously low—but not impossible,” says this person, principal of a small New York design boutique that specializes in interior renovations. “But bidding $100,000 is impossible. … [T]hey won’t make any money.”

The recession has wreaked havoc on the architecture industry in many ways, from a rollback in projects to staff layoffs to declining revenue. One of the most devastating aftershocks, however, has been the practice of fee-cutting, as firms struggle to survive by meeting client demands to save money and tighten budgets.

While no exact numbers are available, architects say fee-cutting is widespread. Scott Kuehn, partner at Denver-based H+L Architecture, an 85-person firm that specializes in healthcare, education, science, and technology, had one long-term client ask for a 10 percent cut on all future work. This client, Kuehn says, “indicated that economic pressure and uncertainties … were driving similar requests to all business partners, suppliers, and vendors.”

For complete article click here.

Nonresidential Construction to Grow by 3 Percent in 2011

AIA’s Consensus Construction Forecast predicts a 20 percent-plus decline in nonresidential construction spending through 2010.

According to the semi-annual Consensus Construction Forecast recently released by the American Institute of Architects (AIA), the poor conditions created by a combination of surplus nonresidential facilities, low demand for space, declining commercial property values, and lack of available credit are laying the groundwork for drop of more than 20 percent in nonresidential construction spending this year, despite slight improvements in the overall economy.

Report: Unemployment High Because People Keep Blowing Their Job Interviews

Another applicant blows it by describing his short-term goals as "getting this job."

 WASHINGTON—With unemployment at its highest level in decades, the U.S. Department of Labor issued a report Tuesday suggesting the crisis is primarily the result of millions of Americans just completely blowing their job interviews.

According to the findings, seven out of 10 Americans could have landed their dream job last month if they had known where they see themselves in five years, and the number of unemployed could be reduced from 14.6 million to 5 million if everyone simply greeted potential employers with firmer handshakes, maintained eye contact, and stopped fiddling with their hair and face so much.

“This economy will not recover until job candidates learn how to put their best foot forward,” said Labor Secretary Hilda Solis, warning that even a small increase in stuttering among applicants who are asked to describe their weaknesses could cause the entire labor market to collapse. “If we’re going to dig ourselves out of this mess, Americans need to stop wearing blue jeans to interviews, even if they’re nice blue jeans, and even if that particular office happens to have a relaxed dress code.”

“They also need to start bringing extra copies of their resumés, as it will show they are prepared and serious,” Solis added. “And, by the way, how hard is it to send a hand-written thank-you note afterward? Anyone can dash off an e-mail.”

A federal survey of employers found that nearly half of job-seeking Americans botched their interviews by responding no when asked, “So, do you have any questions for me?” Among candidates strongly qualified to perform the jobs they were applying for, 36 percent didn’t bring a notepad or pen to the interview, and 16 percent were thrown off guard when the interviewer broached topics un≠related to work, such as the weather, sports, or personal hobbies.

Twelve percent, employers said, did this kind of nervous throat-clearing thing.

“If applicants would just say yes when asked if they played softball or liked golf, we could add 350,000 jobs to the private sector,” Deputy Labor Secretary Seth Harris said. “The fact is, right now, today, approximately a third of the country’s manufacturing positions are vacant. Auto plants across the country, especially in Detroit, are sitting there just waiting for people to come in and build cars.”

“You may be a qualified candidate, but none of that matters if you walk into that interview lacking confidence,” he added. “Don’t act too confident, though. And don’t joke around too much. And don’t be overly friendly or ask too many questions. But be yourself.”

The Labor Department confirmed their statistics don’t take into account the estimated 20 million citizens who were unable to get interiews in the first place because of formatting errors in their resumés, or cover letters that slightly exceeded one page.

“At this point, hiring someone who doesn’t use bulleted lists, strong action verbs, or boldfaced keywords is completely out of the question,” said public relations executive Max Werner, who has been looking for office managers and a CFO since 2008. “And if you’re going to end your cover letter with ‘best wishes’ instead of ‘sincerely,’ I don’t care how experienced you are—you won’t be working for me.”

President Obama, who last week signed a law extending unemployment benefits, said the legislation would also address joblessness by creating a $1.2 billion program aimed at training Americans to use firm but approachable body language to make a great first impression.

“My administration remains fully committed to putting citizens back to work by making sure they show up at least 15 minutes early to their interview and never badmouth a previous boss,” said Obama, flanked by unemployed Americans during an address from the White House Rose Garden. “Our new ‘Nail the Interview, Score the Job’ initiative will help regular Americans like Paul and Tracy here remember that they should prep ahead of time by learning a few things about the company they want to work for.”

“And that little things,” he continued, “like making sure your socks match, matter.

Via The Onion

Paul Goldberger Comments on Progess at Ground Zero

Paul Goldberger, Architecture Critic

Question: How do you feel about the progress on One World Trade Center?

Paul Goldberger: I’m disappointed in where things are at Ground Zero right now.  I think it’s sad, on the other hand, I do think the people involved are trying reasonably hard, under the circumstances.  But there’s really not a great deal of vision there.  It begins really right back the morning of September 12th when Governor Pataki, who had the most authority in this situation, made the decision to keep everybody in place who was a player in this situation, the Port Authority, which owned the World Trade Center, the developer, Larry Silverstein, who had leased the Twin Towers.  And most importantly, to keep the program in place.  The program—by program, I mean the functions of the buildings.  So, you know, the World Trade Center was 10 million square feet of office space plus some retail and some other commercial space, that’s what was transferred into the new project with the addition of a memorial and some cultural facilities and the, the prescription that it be in a different physical format, obviously, not 210-story towers again, but spread out around the site in a different way. 

But you know, we never really looked into completely different uses for the site.  We never really thought from point zero, we might say, about what the ideal thing to do there would be.  Instead we took a program that goes back to the original World Trade Center in the early ’60s, and it was never really that effective or successful for most of its life, and decided to replicate it. 

And then came all the complex political things that flowed from that, so it’s taken an inordinately long time, it’s cost a huge amount of money, and we still don’t really have anything that I think the world can look at and say, “This is a great achievement that shows us that the United States has come back from this thing in a noble way.” The office building that’s going up is sort of okay, but it’s not, I don’t think going to be a distinguished or particularly beautiful building.  It’s not the… it doesn’t show all that we are capable of in terms of architecture. 

Similarly, the other office buildings that have been planned for the site, most of which are on hold now because of the economy, are better than the average piece of junk on Third Avenue, that’s true, but that’s not a very ringing endorsement. 

And then for this site that is so critical to the eyes of the world, where we had the opportunity to show the world that we could do something that was bold and visionary, we have really not succeeded at doing that. 

I think a great tower would have had a place there.  Either a pure tower, just as a symbol, like the Eiffel Tower of the 21st Century, we might say. Or, remembering that the United States is, after all, the birthplace of the skyscraper—a building form that we’ve now given to the world that is now common all around the world—what better place, if we’re looking to show the world that in fact we have not been defeated by this attack, than to come back to this place, in this country, in this time and build the most advanced skyscraper we could possibly imagine.  The one that will bring the art of skyscraper design forward yet again. 

And instead, we are not doing that.  We’re doing a building that is not that different from a lot of commercial buildings built everywhere, and in fact, not as good as many of them.  It’s going to be very tall, it’ll have a little more flair to it than the old Twin Towers did, but, you know, it’s not what it might have been.

Recorded on June 22, 2010
Interviewed by David Hirschman

Slump in Demand for U.S. Architects May Be Near End

Our company began to experienc a slight uptick in hiring during May to present.  This article by Prashant Gopal in Bloomberg Business seems to confirm what we are reporting:

May 19 (Bloomberg) — A leading indicator for U.S. commercial property construction showed signs of improvement in April, indicating a rebound in building may be near, the American Institute of Architects said.

The Architecture Billings Index climbed to 48.5 from 46.1 in March, the third straight monthly increase, the Washington- based group said today. While any score of less than 50 indicates a drop in demand from the previous month, April’s decline was the smallest since January 2008.

“It appears that the design and construction industry may be nearing an actual recovery phase,” Kermit Baker, the group’s chief economist, said in a statement. “The economic landscape is improving.”

The index is an indicator of future building of offices, warehouses, apartments and retail properties. There is typically a lag of about nine to 12 months between the time architects bill clients and when developers start spending on construction, according to the AIA.

Overall construction spending in the U.S. increased 0.2 percent in March, fueled by federal stimulus spending on power plants, hospitals and transportation projects, the Commerce Department said May 3. Private construction spending for non- residential projects fell 0.7 percent in March from the previous month and 26 percent from a year earlier.

Commercial Property Values

The Moody’s/REAL Commercial Property Price Index fell 0.5 percent from February, the second straight monthly decline, Moody’s said today in a report. Prices slid 25 percent from a year earlier and are down 42 percent from the peak reached in October 2007.

RNL, a Denver-based company that provides architectural work for mixed-use projects in the western U.S. and overseas, has added five employees over the past three months. It trimmed its workforce to about 150 from 250 during the past two years, said Richard von Luhrte, the firm’s president.

Foreign investors, public-private partnerships and landlords seeking to renovate distressed properties are driving von Luhrte’s business, he said in an interview.

“We’ve seen the bottom and we’re stable,” he said. “Obviously the last year has been challenging, but there are some opportunities out there.”

The Northeast was the strongest of the four regions measured by the American Institute of Architects index, registering 51 and showing growth in demand for commercial architects. It was followed by the Midwest at 49.2, the South at 46.5, and the West at 44.7.

The Architecture Billings Index is based on a survey of firms owned by AIA members. Participants are asked each month whether their billings increased, decreased or stayed the same.

Architects, Congress and the “S Corp.” tax hike

Very good article in THE HILL by George H. Miller, FAIA – 06/07/10 10:03 AM ET

When Congress returns this week, one of the first items on its agenda will be finding a way to pay for extending unemployment benefits to the millions of Americans who find themselves jobless even as the economy begins a slow and fitful recovery. The Senate hopes to begin work on the “tax extenders package” that was approved by the House of Representatives on May 28, just as lawmakers left for the Memorial Day Recess.

We sympathize with Congress as it looks for ways to pay for extending jobless benefits. Indeed, roughly 25 percent of my professional colleagues are unemployed – in some states the percentage is even higher – and would benefit from any extension, as well as from other provisions in the legislation, such as Build America Bonds. And yet, as world markets tremble from global debt anxiety, Congress is rightly pre-occupied with finding ways to fund the extension without adding to the ballooning deficit.

Bad decisions usually result when two such countervailing forces are at work. None is worse than the effort to help fund the extension by raising taxes on individuals and small businesses that form S Corporations. So-called S Corporations help to create jobs and economic growth by reinvesting hard-earned capital back into their enterprises. S-Corporation owners often pay themselves a salary, to which Social Security and Medicare taxes apply. But profits that are paid to the owner as a shareholder are not subject to payroll taxes. They will be for many S corporations, however, if this short-sighted provision passes and is signed into law by the President.

This type of tax hike comes at a time when many people – out of necessity due to layoffs and restructurings throughout the economy – are forming their own home-based consultancies, web design firms, landscaping enterprises and the like. If they structure themselves as an S Corporation – and many of them do – they would be caught up in this new tax just as they are planning to set up shop, hire staffers and buy the equipment they need to get started.

That is certainly the case in the architecture profession. We are struggling to find ways to restructure and resuscitate our careers and livelihoods after the collapse of the real estate market. Many of us operate as S Corporations, because it allows us the flexibility to compete in world markets and retain and attract the talent that has kept American architecture the envy of the world. We may be forced to lay off staff or stop hiring new staff to pay the new tax – even though this provision is in a “jobs” bill. The provision is particularly troubling in that it specifically calls out S corporations with three or fewer key employees.

We applaud Congress’s effort to find a way to extend unemployment benefits for individuals who need them. But as the economy begins to recover, now is the worst time to raise taxes on a sector that is a catalyst for job growth in the design and construction industry. After 27 consecutive months of contracting, the American Institute of Architects in May reported that architectural billings have trended upward for the third consecutive month. That’s an indication that new construction could be on the rise in nine to 12 months, which would create more jobs and advance our nation’s economic recovery.

Rather than hike taxes, Congress should enact legislation that generates revenue with little or no cost to the Treasury. One such bill is H.R. 5249, the Capital Access for Main Street Act of 2010, introduced by Reps. Ed Perlmutter (D-CO) and Mike Coffman (R-CO). This legislation would change accounting rules for community banks with less than $10 billion in assets as they work with borrowers to renegotiate loan terms, avoid large sums of commercial foreclosures, and free up credit that can be used more constructively.

Unscrupulous businesses do use S corporation status to avoid paying their proper share of taxes and they should be caught and punished. But the Internal Revenue Service is already empowered to address that issue. This tax hike lumps together the good and the bad, penalizing thousands of honest small businesses that follow the rules. We strongly urge Congress not to support this inappropriate tax increase.

George H. Miller is president of the American Institute of Architects, based in Washington, D.C.

Winter Street Architects, Salem, MA – Biting the BIM Bullet

I have said numerous times lately that the lessons of this prolonged recession and necessity to achieve efficiency’s to survive will be a game changer for BIM acceptance in AEC firms.  Everyday I see evidence supporting that.  Here is a post from a firm in Salem, MA that agrees that BIM is key in moving forward and competing:

Photo-realistic BIM Rendering of the Salem State College, Weir-Stanley Building Music Rehearsal Space

If you haven’t done it by now, you better get to it!  Or fall so far behind you may never be able to catch up.  Bite the BIM bullet.  It’s the future of the building industry and the future is now or just around the corner.  Our firm swallowed the BIM pill way back in 2003; a year after Revit was first introduced to the market by Autodesk.  What we saw then was what other industries have been doing for years: virtually prototyping and testing designs prior to fabrication.  Economics and compute power had the practice relegated to big business and complex industries, but now the industrial evolution has finally availed these tools to the AEC Industry that allow us to rise up and shed our Neanderthal trappings.  Those who will not adapt and wait, or dismiss it as a passing fad, will surrender to Natural Selection ending up in their own version of the La Brea Tar Pits. What BIM allows us to do is create buildings in the same way that we think about them; as visualized complete projects.  We don’t think in plans, elevations, sections and details.  These methods deconstruct the total visualized idea into two dimensional components simply to communicate complexities of the idea to someone else or to allow us to coordinate others’ work into our complex idea.

Full article via Winter Street ArchitectsBlog