The steady slide in revenue among the Southwest’s leading design firms continued for the fourth straight year in 2010, according to figures provided by the firms participating in this year’s survey. Design revenue from projects located in Arizona, Nevada and New Mexico totaled $1.24 billion in 2010, down 5% from the previous year and 29% below the peak of $1.74 billion in 2006.
“The economic downturn has been a sobering experience and has reinforced our focus on being a company that provides diverse service offerings across a range of sectors,” says Tim Lines, managing vice president of the desert/mountain regions in Stantec’s Phoenix office. “I believe the increased competition for each and every project has made us a stronger organization, as clients now have higher expectations for their consultants.” This renewed focus helped Stantec bring in $36.1 million in the region for 2010, moving up two spots to sixth in the overall ranking.
Projects located in Arizona provided surveyed firms with $643 million in revenue in 2010, down almost 5% from the previous year.
“We’re cautiously optimistic,” says Laurie Roden, Southwest area manager for the Phoenix office of HDR Engineering. “General transportation has flattened a bit, but transit, power/energy, federal and water are seeing growth.” HDR placed third overall and topped the region’s transportation list.
Firms working in Nevada reported nearly $300 million in design revenue, off just 1% from 2009. Some firms even started to see improvement, such as Houston-based PGAL, which saw its Las Vegas revenue rise nearly 5%. “Our workload in the Southwest continued to be strong in 2010 primarily due to continued aviation and military projects, including McCarran International Airport Terminal 3 and Related Facilities in Las Vegas,” says Cathy Boyce, principal at PGAL.
New Mexico firms saw revenue fall nearly 8% to $298.1 million, with little improvement in sight. “The business outlook for 2011 is neutral, with another flat year anticipated,” says Barbara Crockett, vice president and New Mexico area manager in CH2M HILL’s Albuquerque office. “Our biggest areas of growth will be in the water and energy sectors and helping clients identify sustainable solutions to addressing the critical nexus of the two.” CH2M HILL has held the top spot in the overall ranking and in the Nevada and New Mexico rankings for an impressive three years in a row.
To survive the recession, many firms had to ask more of their employees. “It quickly became apparent that we were rowing for our livelihood, not just to win the race,” says Kristine Mower, director of marketing for the Phoenix-based architecture firm Orcutt|Winslow. Rather than chase every scrap of work, Mower says the firm made a conscious effort to develop deeper client relationships. “This resulted in a more than 70% shortlist-to-win rate and a number of new clients,” she says.
PGAL has benefited from an efficient use of talent. “We don’t confine our professionals to projects in their local regions,” says Boyce. “We make project assignments on the basis of who has the expertise needed for the particular situation, not where their home office is located. That gives us a lot of flexibility and market reach.”
Lines says that versatility and agility are crucial for large international firms such as Stantec during an economic downturn, as offices in different states and countries can collaborate and share work where the opportunity is greatest. “For example, our Tempe office, which focuses on providing services to the world’s leading mining companies, has grown significantly over the past year,” he says.
Another sector showing strength is water and wastewater, which grew more than 11% over the previous year. “In the arid Southwest, there is a relentless focus on the wise use and reuse of water resources,” says Tom McLean, vice president and Arizona area manager of CH2M HILL, the top-ranked firm in both the water and sewerage categories. “To that end, the further implementation of advanced water treatment technologies (such as membrane) combined with the use of alternative renewable energy sources is becoming more critical.”
While the health-care and education sectors actually improved during the downturn, in 2010 they have tapered off to pre-recession levels. However, several firms are still bullish. “We still feel very strongly that both education and health care will continue to be strong for us, and we expect senior living to pick up quickly,” says Erik Clinite, partner with Orcutt|Winslow.
Landscape architecture and surveying/mapping are each down 27%, while multi-family residential continues its five-year slide from a high of $100 million in 2006 to just $3.7 million in 2010.
Revenue gained from projects that are registered with LEED or the equivalent plummeted 33% in 2010 to $73.6 million. But designers say that doesn’t necessarily reflect a retreat from building sustainably in the Southwest. “If you were a good architect, you considered green design from the day you started designing,” Clinite says. “It seems that many of our owners don’t really see the need for someone to certify that they are doing sustainable design, and as a result we think [LEED] will decrease in popularity.”
The number of LEED-accredited (or equivalent) professionals also dropped for the first time in the survey, to 556 in 2010 from 760 in 2009. While this may be due to staff reductions, the number of licensed architects and engineers actually rose during the same time period as firms began hiring again.
As the economy improves, design firms are seeing increased inquiries from owners and developers, but under new, more fiscally frugal parameters. “Our clients are forced to do more with less, so it is up to HDR to help our clients get projects done more efficiently,” Roden says. As a result, interest in public-private partnerships and alternative delivery methods such as design-build is on the rise.
Modern delivery methods coupled with the acceptance of building information modeling will require teamwork and cooperation like never before. “The ability to work more directly with the contractor in creating a model that is both a design and construction tool will continue to revolutionize the profession,” says Paul Winslow, founding partner of Orcutt|Winslow. “That can mean a better buy and better design solution for the client, while minimizing the time and money lost in correcting oversights or discrepancies.”