AIA Members Coping with the Economic Downturn

by Russell Boniface
Associate Editor

Summary: AIArchitect asked AIA members: Where do you see the economy in the next six months, and how do you think your firm might be affected?

I have a small firm, dealing with smaller scale projects. It seems that the banks are having a continued [credit] tightness here, and it is having a greater effect now than it did previously. I am the treasurer of AIA Los Angeles, so I interact with members who run the bigger firms, and they are starting to see things ease up a little bit with the banks with more established developers and clients, but I am certainly not feeling that on my end yet. I see more difficulties for clients to get loans. I think on the consumer end, which is more where I am, they are locking the strategy that they pulled out 12 months ago when they initially reacted to the stock declines. I had a client who said it couldn’t go forward and had to conserve cash, and the banks were not going to help him out in the way that he could have been helped out 12-18 months ago. Things are definitely bad for the small scale projects, and the consumer in general. I think those positions are not going to change unless they are forced to by the government. I think the small projects are going to be hard to finance.
—Stuart Magruder, AIA, LEED, principal, Studio Nova A Architects, Inc., Los Angeles, Calif.

I am leading our "Not Business as Usual" response at AIA New York and it has brought many people into the AIA New York chapter. People feel that the AIA is responding to the economy by providing real services that people need. It provides support, networking, and activities to keep them connected to the profession, whether it’s volunteering, training, or brushing up on presentation techniques. Where it is slower is in trying to develop opportunities for paying work. We have connected with AmeriCorp and begun a dialogue with them about program opportunities, but that will be a long-term proposition. Advocacy is critical to make sure our elected and appointed officials know that we are out there and that we do care what is going on in terms of contracting opportunities. We use Renew and Rebuild as a template when we talk to people.

At my firm, which is mid-size, we were lucky because we had quite a bit of work not from last year that carried over into this year. We are not seeing activity for next year yet. Our biggest projects tend to be school projects, which can happen quickly because of the funding sources. Nothing from the private sector is forthcoming—projects are either private residential where they don’t have to borrow money or government or higher education. I think things will be slow for another three to six months because of the size of our firm and projects we do. I think it depends on what markets you are in and whether or not you have put your firm in a place that could weather this kind of a downturn. We are fortunate because we didn’t staff up heavily last year and we don’t have any debt so we are in an okay financial position to hopefully weather the current situation.
—Sherida Paulsen, FAIA, 2009 President of the AIA New York Chapter and partner at PKSB Architects

While these are very difficult times for our industry, it is also a great time to “re-tool” and prepare ourselves for the upcoming recovery. When you get a downturn, you tend to take it personally. But we are just trying to react to the realities that we can’t control. That is a key factor: what are those things you can’t control? We re-tooled our company for the economy that will be there after the recession. It’s important to re-position for it. I think the emphasis now is balancing your short-term focus with your long-term strategies. We have been on the short-term focus side by trying to increase our billings, preserve our cash flow, and reduce our cost. To re-tool for future growth, we are following population growth by focusing offices in high-population markets. Second, we are putting emphasis on markets that have demographic growth. Aging baby boomers are the highest growth trend, and we have significant senior care capability. Third, we have been expanding nationally our public sector markets. That is slow as well, but has the highest likelihood of coming out of this recession. We think this market includes health care, environments for aging, education, and government.

We have also expanded our international practice by acquiring talent through our intern development program. Going forward, is the talent shortage going to be there? My sense is that in the short-term it will be easy to find staff, but a lot of that staff may leave the industry, so I don’t know how big the pool will be. In the long-term I think we are still going to have a shortage, unless baby boomers decide that they can’t retire now. It might take a few years but I think we will get through this recession. Individual portfolios and 401Ks will hopefully get back to where they were at, so retirement will still be there but just get pushed off a few years. This is a good time to prepare for the talent shortage.

At this point I am cautiously optimistic. I’ve always said that once you start hearing some good news it’s a sign we are at the bottom. You are staring to hear that now. The stock market seems to have hit its bottom and is stabilizing. While it is not consistent, the sales numbers have been up. I think once we get more of that kind of news, I think consumer sentiment will start to change. When consumer confidence comes back, retail numbers will go up and have a reversible effect.
—Greg Hollenkamp, AIA, LEED AP, CEO, KKE Architects

We seem to be doing fairly well in the face of difficult economic times. We have a diverse client group which apparently has aided us. We had some high–rise residential work that stopped in the late summer of 2008 and our developer office building work has also ground to a halt, although projects under construction have continued. In early March we did have to reduce staff by 10 percent and that was painful. Our institutional projects, particularly college and university work, have largely continued and we have recently been awarded two new community college projects. We think we are in decent shape for 2009. Our concern now is for 2010.

Our response to the evolving economic climate has been three-fold: one, think about where we would like to be as a practice when the economy picks up steam and shape all our actions towards that vision; two, market more aggressively to our previous strengths and to known client types; and, three, emphasize our planning and campus/urban design experience, particularly my own qualifications as campus architect at UCLA while master planning for $2 billion worth of development there. As an example of where we would like to be as a practice, we have put additional efforts into marketing overseas even though the rest of the world is as slow as the U.S. We would like to be better positioned for more foreign work when those markets come back.
—Charles Warner “Duke” Oakley, FAIA, principal, Ehrlich Architects, Culver City, Calif.

Charlotte and the Southeast share the same economic contractions as the rest of the country. In previous recessions, this part of the country went in late, and came out early. That is not the case this time—two of our large economic engines, the Charlotte- based headquarters of Bank of America and Wachovia Bank have been hit hard. The overall economic impact to the region is only just now being felt or understood. When the recession comes to an end, we will find that the economic landscape will be unrecognizable from what we have known.

The Charlotte area has experienced layoffs of employees to respond to the slow down in projects. Last fall a medium-size firm addressed the immediate impact by first laying off a few employees, then utilized a multi-pronged approach where expenses were reviewed and reduced, and an across the board pay cut and rolling furlough was instituted. One small practitioner took action to reduce overhead by sub-leasing the live/work condo that was his office.
—Wayne H. Camas, AIA, president, Camas Associates, Charlotte, N.C.