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ENR 2017 Top 225 International Design Firms Chart

ENR 2017 Top 225 International Design Firms Full PDF

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On the Top 225 International Design Firms list, firms are ranked based on design revenue from projects outside of their home countries, measuring their presence in international commerce. The ENR Top 150 Global

Design Firms list measures total worldwide design revenue, regardless of the project location.

The sagging market for petroleum-related projects is the main culprit in the global revenue downturn. International revenue from the petroleum sector fell 19.0%, to $14.36 billion, in 2016. International revenue for the sector has now fallen 35.4% from 2014.

Firms in the petroleum sector say large projects are dwindling. “Many projects have been canceled or delayed. The current market is expected to be less active,” says Sung Sang-Rok, CEO of South Korea’s Hyundai Engineering Co. Ltd.

For WorleyParsons, 70% of its revenue comes from hydrocarbon work. However, the sector’s few new megaprojects has had only a limited impact on the firm, as much of its work is in smaller projects and in operations and maintenance, says Andrew Wood, CEO of Australia’s WorleyParsons. Further, “within hydrocarbons, we can shift between upstream, midstream [or] downstream as capital expenditure shifts its emphasis.”

While the demand for oil is not about to dry up, Wood notes that “the car fleet in its totality, however, is expected to double in the next 20 years, from around one billion cars today to around two billion cars in 2040. This will drive up oil demand.” He adds, “The increase in demand for car travel for the middle class, we believe, will overpower the effects of improving efficiency and the take up of electric vehicles.”

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Article Index:

• Consolidation Continues
• Demographics 101
• Belt & Road
• A Mixed Bag
• A New Approach

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Consolidation Continues

Over the past several years, design firms have been consolidating, leading to the development of an increasing number of megafirms. This trend is continuing this month with Canada’s SNC-Lavalin Group Inc.’s absorption of U.K.-based W.S Atkins Plc, raising the combined workforce to over 50,000. “It’s very much business as usual,” says Heath Drewett, now Atkins’s president. Having achieved the goal of an 8% margin last year, the focus is now on growth, he adds.

In the design sector, “consolidation will definitely continue,” says Lars-Peter Søbye, president and CEO of Denmark’s COWI AS. COWI seeks to make up for its relatively small size by being in the top three in selected regions and core business lines. Søbye plans to grow sales by 25%, to $1.1 billion, over the next three years.

“This … will be a year of consolidation,” says Tomas Carlsson, CEO of Sweden’s Sweco AB, which acquired Netherlands-based Grontmij in 2015. Yet with a head count of about 16,000 now, “we are looking for acquisitions all over northern Europe,” he adds.

With some 6,000 staff worldwide, Paris-based SYSTRA Group is relatively small, but “if we are looking for specific expertise, we can second people from the shareholder,” says COO Andrew McNaughton. France’s state railroad company, SNCF, and the Paris region mass-transit authority, RATP, each owns 42% of the firm.

The acquisition of MWH Global by Canada’s Stantec has expanded the firm’s reach. “The integration of MWH into the Stantec network continues to demonstrate synergies as MWH brings a global footprint in geographies where the combined companies can now offer a more diverse scope of services to local communities,” says Alan Krause, Stantec’s global operations president.

The trend toward mergers and acquisitions also can be seen in Asia. Surbana Jurong Pvt. Ltd. of Singapore acquired Australia’s SMEC in August 2016, expanding its global workforce to 9,800 employees in more than 95 offices across 40 countries.

Surbana Jurong also has launched a series of joint ventures. On May 25, it announced a new joint venture with Safdie Architects, Boston. To be called Safdie Surbana Jurong (SSJ), it will pursue major residential, commercial and institutional projects in Asia, says Wong Heang Fine, group CEO of Surbana Jurong. In March, Surbana Jurong formed a joint venture with China Highway Engineering Consulting Corp., a design subsidiary of China Communications Construction Group, to provide design services for highway and municipal projects, says Wong.

In another move by a Chinese firm, JSTI Inc. last September acquired EPTISA, a Spanish engineering firm that works in more than 45 countries around the world, and TestAmerica, which is the largest third-party environmental testing firm in the U.S., with 23 testing laboratories and more than 40 customer service centers, according to Allen Li, JTSI president. “These two M&As brought material changes to the international business and layout of JSTI,” expanding the firm’s global footprint to nearly 3,500 overseas employees, Li says.

In a developing story, Dubai’s Dar Group has apparently acquired 19.9% of WorleyParsons’ stock in a takeover bid. WorleyParsons announced it had rejected a $2.2-billion bid by Dar Group in November, saying the offer was undervalued. Many see Dar’s bid as a move to diversify into the industrial and petroleum markets.

Demographics 101

In developed and developing countries, there has been a growing trend toward urbanization that has attracted the notice of international design firms. “The new generation, which we can call ‘the vertical society,’ is increasingly migrating to urban areas, living in buildings and moving away from suburban life,” says Alexandre L’Heureux, CEO of WSP. Since this generation wants to live in an environment in which work, home, social and cultural life, and sport activities intermingle, cities need to evolve, he says. To meet this demand, cities must be rethought around major dynamic, active urban centers, he says.

Asia’s growing middle class is demanding better infrastructure and fueling a demand for an increased consumer market. “The underlying demographic trends in Asia underpin our expectation of continued good opportunities in the region. We expect to see increased opportunities in the food-and-beverage, health-care, tourism and education sectors as Asia’s expanding middle class looks to enjoy a fuller basket of consumer goods,” says Greg Lowe, Group CEO of New Zealand’s Beca Group Ltd.

Increasing demand for better infrastructure is boosting prospects for international firms. Water and wastewater contracts pushed up sales in the sector for Netherlands-based Royal HaskoningDHV BV by 59% last year, now accounting for a quarter of group business, according to Anke Mastenbroek, director of the water business line.

Interest in new technologies, such as the company’s Nereda wastewater treatment system, is boosting work, adds Mastenbroek. “Smart water solutions and technology will redefine everything in the water and wastewater industries,” she believes.

Urbanization, even in Europe, and climate-change mitigation are creating demand for design firms, adds Carlsson. L’Heureux agrees, adding, “In 50 years, the temperature in summer in London will be 6.5° Celsius higher than it is today. As currently designed, most buildings are inadequate to cope with this daunting challenge.”

Population growth, urbanization and the need for the world to upgrade or replace vital infrastructure continue to create a range of opportunities across the globe. “We expect to see a sustained flow of opportunities as we work with our clients to formulate sustainable approaches to managing these global challenges,” says Lowe.

Global population rise, urbanization and competition between major cities for local investment are driving the demand for transportation services, says McNaughton. Railroads and metros underpin the SYSTRA Group, but the company is expanding into highways and bridges.

High-speed rail is “very location-specific” and demands long lead times, says McNaughton. “It’s a particular market, unless you are in a country like France.” Even France’s high-speed program “is coming to an end.”

Belt & Road

Some of the most prominent opportunities in Asia are the result of China’s Silk Road Economic Belt and Maritime Silk Road, known as Belt & Road, designed to foster economic growth for countries in southern Asia and the Middle East. “The greatest opportunities for business in the international design market lie in Asia and in countries along the Belt & Road proposed by China,” says Keith Griffiths, chairman of Aedas.

Omar Shahzad, CEO of WL Meinhardt Group, cites a study that shows there were 8,158 new contracts, amounting to $126 billion, signed in 61 Belt & Road countries in 2016. “Having offices in most of the 65 countries along the Belt & Road, Singapore-headquartered Meinhardt Group is well positioned to join the next wave of mega­developments along [this] burgeoning market,” he says.

Many firms are becoming more active in Asia. SYSTRA aims to expand its international work, says McNaughton. Recent acquisitions, including firms in Australia and India, give it “the ability to deploy knowledge and expertise of the global business to local markets.”

Outside its home market, Sweco works on a project-by-project basis in Asia, Africa and Central America, says Carlson. “We are looking at countries where we can export our core competences. We are careful not to set up permanent offices [there],” he adds.

Mastenbroek reports growing water and wastewater work in urban India. In Vietnam and Indonesia, Royal HaskoningDHV is “steadily growing in the field of basic service delivery in water and wastewater treatment,” she says. International funding agencies are crucial. “We’re seeing an increase of private-sector involvement,” she says.

From its traditional East Asian bases, including mainland China, Hong Kong and Singapore, Atkins is expanding into regional markets, including Vietnam, Indonesia and the Philippines, says Drewett. Rather than establish permanent offices there, Atkins seeks local partnerships.

With 60% of sales outside its home country, South Africa and the U.K. are Royal HaskoningDHV’s biggest foreign water and wastewater markets, notes Mastenbroek. In India, “the government’s drive toward smart cities also gives us good opportunities,” she says.

A Mixed Bag

In Europe, Scandinavia has the hottest demand. “Our base markets are in northern Europe,” says Carlsson. Sweco plans to build significant share in the region, which is served by numerous design firms. It already has some 10% of the Nordic market, says Carlson.

Norway, Denmark, Germany, Belgium and the U.K. are a “good market,” says Carlsson. In Germany, the company is “looking at double-digit growth,” he reports.

Sweden and Norway “decided to pour money into infrastructure,” says Søbye. But Danish infrastructure demand has fallen. Atkins’ continental European business is largely confined to “very good” road and rail markets in Sweden and Denmark, says Drewett.

In its home base, Drewett is optimistic about the U.K. infrastructure market, despite uncertainties surrounding the country’s planned departure from the European Union [Brexit] in 2019. “It’s had very little impact [on us] thus far,” he says. Carlsson agrees, and McNaughton is relaxed about Brexit, describing the U.K. as “a future core market.” Søbye is also optimistic about U.K. infrastructure. If the post-Brexit economy declines, the government will need to invest, he believes.

Royal HaskoningDHV also finds a good market in the U.K., “spurred by the need to upgrade and extend old assets applying our new technologies,” adds Mastenbroek.

In the Middle East, the plunge in oil prices has hit many nations hard, depressing not just the local petroleum market, but also the publicly funded infrastructure and building markets that these nations fund. However, many firms believe the worst is over.

“It seems that the [Gulf Cooperation Council] countries are healing from the drop in the oil prices last year and the general global economic slowdown. One might even consider that this negative experience has finally transformed itself into an opportunity for international designers,” says Birhan Emre Yazici, CEO of Turkey’s NKY. The need for public service architecture, urban retrofitting projects and tourist facilities increased toward the end of 2016, he notes.

However, the Middle East remains a “demanding” market that is politically unpredictable and subject to fierce competition, says Søbye. Getting paid is still difficult, too. Drewett reports a hiatus in rail and infrastructure projects in the U.A.E., while real estate is picking up.

Many firms are wary of working in Iraq. “The country has tremendous financial pressures due to the ongoing war with ISIS, the oil-price slump, and acute mismanagement and corruption. [They] have affected the growth tremendously,” says Ammar Al Assam, CEO, Dewan Architects + Engineers. He says projects are almost non-existent and collecting receivables is a great concern. “This is especially significant given that Iraq is producing its highest volume of oil—at close to 4 million barrels—with not much to show for it, unfortunately,” he adds.

Africa continues to be a difficult market for many inter­national designers. The drop in oil prices hit many African nations hard, causing their markets to slump. For example, the Angola, Mozambique and Algeria markets are soft. “Due to the oil and gas price decline, clients have no foreign currency and try to pay in local currency,” says Ilidio de Ayala Serodio, PCG president, Profabril Group.

Other firms also are seeing the impact in Africa of low oil prices. “Our exposure to the oil-and-gas sector had two different set of impacts: On the one hand, oil-dependent countries such as Gabon, Congo and Nigeria significantly reduced their budgets due to low oil prices, and our business there slowed down. On the other hand, large hydrocarbon discoveries in Senegal, Cote d’Ivoire, Ghana and Mauritania are creating new opportunities for us,” says Mosbah Kanzari, deputy general manager of Tunisia’s Studi International.

However, Kanzari continues to be optimistic about Africa, saying, “We feel strongly optimistic about the design market in sub-Saharan Africa, where the infrastructure gap is still significant and the demand for professional and on-the-ground design capability very large.”

A New Approach

The game is changing for international firms. It is no longer enough simply to provide a quick design or a quick fix, especially in developing countries. Clients are beginning to rely on international design firms to help develop programs and oversee construction to make the best of a country’s limited resources.

Increasingly, clients in international markets and developing countries are seeking full-service and co-ownership models from their engineering and project consultants, says Yuichiro Motomura, CEO of Japan’s PADECO Co. Ltd. He says developing countries are no longer satisfied with firms’ “touch-and-go” models that provide merely advisory or project design services.

Clients want designers not only for feasibility studies but also to manage the whole project, from concept to commissioning, says Motomura. “So, gone are the days when we can merely be visitors to these countries. Our engineering teams now have to be closely embedded on the ground, ensuring successful delivery of infrastructure projects actually in operation.”

Many international design firms say they must not only solve the problem in front of them but also look at the client’s overall needs and plan long-term solutions. “As engineers, I believe we have two options: Continue as we are and be commoditized or, even worse, be replaced by machines. Alternatively, we must embrace a disrupted future and become better designers and innovators that truly bring ideas to life and shape the world,” says Kourosh Kayvani, global director of excellence and expertise for Australia’s Aurecon.

“We can steer thinking away from expedient, short-term economic and political solutions. We can become creators of both elegant and functional solutions to address society’s big challenges if we embed ourselves within the process … with a passion for design,” says Kayvani.