Where We Are and Where We Are Going
Where We Are
A discussion of the current state of development, design and construction industry conditions came from an unlikely recent event: a party. The ValleyCrest Cos. hosted a Stimulus Party in March. The guest list included Denver Mayor John Hickenlooper and members of the design, construction, development and educational communities. What we learned:
• Real Estate. Significant money is sitting on the sidelines while the “pricing gap” between sellers and buyers remains significant. Investors are frustrated by the lack of deals on the market, and some investors who raised capital over the past 24 months are at risk of losing funds that were to be invested.
• Signs of Re-pricing and Repositioning. Many REITs were refinanced in the first half of last year. As a result, high-quality properties at low loan-to-value ratios have been significantly diminished. New owners seem to be willing and able to invest in upgrades to reposition projects in the marketplace.
• “Micro” Projects. Developers are finding a narrow niche of opportunities to bring new projects to the market—on a very small scale.
• The Design Industry. The American Institute of Architects’ chief economist has predicated that nonresidential construction activity will fall 13.4% in 2010, with commercial and industrial activity falling by 20%. Mid-2011 will see modest increases.
• Opportunities. Market sectors described as the strongest by designers and developers alike are transportation, affordable housing, higher education and health care. Federal work was highlighted, as were opportunities outside of the United States. Specifically, China, India, Brazil, Australia and the Middle East are locations where U.S.-based firms have established a strong presence.
Where We Are Going
We have all heard the comparisons of our current economic conditions with that of the Great Depression. What we have not heard is what architects did then and are doing now to improve their employment opportunities and financial situations. During the Depression, a group of wealthy New York patrons created the Architects’ Emergency Committee to help out-of-work architects. Work opportunities included a survey of traffic along 59th Street, a campground appraisal, an industrial study of steel, brick and mineral resources and an assessment of the city’s food storage systems.
Almost 100 years later, we find the architectural profession in a similar state. I am not aware of an Architects’ Emergency Committee, but architects are using their creativity and problem-solving skills to find new opportunities. Architects are also evaluating their practices and positioning themselves for the economic upturn.
• Building Information Modeling. As the market took a downturn, the design and construction industries investment in and usage of BIM software started to increase. The net result is improved schedules and lower change orders due to conflicts. The use of BIM will increase as interoperability between systems improves, and integrated approaches are utilized for project delivery.
• Marketing. Multi-media digital technology is changing the way architects market their work. Social media and blogging are becoming the communications norm. From job seekers to marketing and presentations, multi-medial digital technology is allowing designers to position themselves in the marketplace.
• Advocacy. From a complacent, privileged past, architects understand their responsibility to participate in community and legislative issues that impact the built environment and their practices.
• Strategic Partnerships and Integrated Project Delivery. Former competitors are finding opportunities for collaboration. The opportunity to capture a small piece of a big pie is better than rolling the dice and trying to capture the entire project on your own. Strategic partnerships can and will work. Once well-established and entrenched relationships are yielding to teaming opportunities.
Through integrated project delivery, architects realize that the sooner we engage the entire project team — owner, architects, engineers, contractors and specialty consultants — efficiencies are gained throughout the process. The result: a better bottom line.
• Design-Build. Computer modeling for fabrication, off-site manufacturing and assembly of building components are increasing the accuracy, quality and speed of construction. Once used mostly in the housing industry, nonresidential sectors are starting to understand the benefits of these proven technologies and processes.
• Green Building. LEED Gold, once the bar to reach, is becoming commonplace, and that is a good thing. Net-zero and meeting the 2030 challenge are the new bars to achieve. Our race to reduce dependence on fossil fuels and improve our national security seems to be a goal that Americans are embracing.