Designers Position for Growth in 2013 and Beyond
Design firms in California are feeling a renewed—though cautious—sense of optimism. The top firms posted $3.49 billion in billings during 2012, an increase of just 1% over the previous year, but many company executives expect the pace of growth to pick up in the rest of 2013 and beyond.
"We started 2013 with the largest backlog in our firm's history, and while the market remains somewhat unsettled, we're seeing much more enthusiasm in our clients and they are embarking on new developments," says Rick Emsiek, partner at architectural firm MVE & Partners Inc., Irvine.
According to firms responding to ENR California's annual survey, design billings for commercial projects rose 37% in 2012 and retail-sector revenue jumped by more than 80%.
The housing market also saw renewed interest from developers, with multifamily design work up 89% over the previous year's total.
Disciplines supporting these sectors, such as land development and surveying, are benefiting and are expanding their work forces, says Zafar Alikhan, vice president-transit planning and environmental leader in David Evans and Associates' Ontario office.
Convention centers are another leading indicator of state and local government agencies' confidence levels, as well as their ability to arrange public/private funding for the projects, says Gary A. Brennen, co-president of Syska Hennessy Group. Brennen, based in the firm's Culver City office, says it is seeing more such work come through the pipeline.
Thanks to the increased business, the top California firms employed 4,966 licensed architects and engineers in 2012, an increase of more than 100 from 2011's level. "While all of our California teams are enjoying new project work, the most prominent areas for hiring activity have been within our practices supporting residential, retail and the oil/gas sectors," says Eric Nielsen, senior vice president for the Western U.S. at Irvine-based Stantec.
Not all markets were up in 2012. Government and other institutional design revenue fell, with fewer major projects on the horizon. As institutional clients look for ways to manage risk better, they are forging more collaborative relationships between their contractors and design firms, says Michael J. Smith, principal and Western region director for Cannon Design, Los Angeles. As a result, interest in design-build and integrated project delivery continues to grow, he says.
During the recession, many public agencies, seeking to pare staffing budgets, began outsourcing their planning and engineering work. But now, as market conditions shift, a new "in-sourcing" trend is emerging, in which government agencies take on work in-house, says Michael D. Knopf, president of Visalia-based Quad Knopf. He adds that public agencies are even competing directly with private firms by offering to perform design work for other government agencies.
California's moderate growth allowed architect LPA Inc. to open a new San Jose office, but the company's president, Dan Heinfeld, feels the recovery should be much more robust than it is. He says public- and private-sector leadership is needed to make the state a job creator, not an exporter, and to restore the educational system as one of the best in the U.S. "I am concerned that our political short-term fixes will have short-term gains that come with long-term losses in both business start-ups and jobs growth," he says.
AECOM, Los Angeles, was the top-ranked firm overall, based on 2012 revenue. It also led the transportation sector list and should benefit from the $800 billion in projected costs to repair California's infrastructure, says James R. Zaniboni, executive vice president and Southern California general manager. He anticipates increased port and waterway activity, driven by expanded trade from the Panama Canal expansion.
But the elephant in the room is California's high-speed rail plan, Knopf says. "The project is located in the heart of our territory and continues to move ahead, but at a much slower pace than promised." Opposition and lawsuits from several fronts make "the expectations concerning forward progress a little uncertain," he says.