The New York region’s construction markets are keeping design firms busy for now, but the potential impact from steel tariffs and already rising construction costs remain a concern for the future.

Architecture and engineering firms ranked on ENR New York’s Top Design Firms list reported nearly $5 billion in 2017 regional revenue, up from the collective $4.5 billion reported in last year’s ranking. Some of that overall revenue growth is due to the ranking’s expansion from the 85 firms that participated last year compared with this year’s total of 95 ranked firms.

A closer look at the current ranking shows that design firms working on projects in New York and New Jersey are indeed growing their revenue, but at a modest pace. For instance, the top 10 firms on this year’s list reported total revenue of $2.11 billion, up 5.4% from the roughly $2 billion that last year’s 10 largest regional players reported. A firm-by-firm review reveals varying revenue results for 2017.

Once again, and by a solid margin, AECOM tops ENR New York’s main ranking, reporting $538.12 million in revenue from New York and New Jersey projects. That equates to a roughly 5% year-over-year increase compared with the $512 million the firm reported last year.
 

ENR New York Top Design Firms 2018

Hot Markets

In all, six of the top 10 firms reported increases in revenue from projects in the Garden and Empire states, while four reported decreases. The second- through fourth-ranked firms, for instance, all reported lower regional revenue.

Second-ranked WSP reported $303.96 million in 2017 revenue, down from 2016’s $317.08 million. Third-ranked Arcadis North America also saw a decrease; it reported revenue of $181.94 million for 2017, compared with $191.11 million in the previous year.

Fourth-ranked Greenman-Pedersen also experienced a mild decrease, reporting $172.48 million, down from the $176.6 million included on the year-ago ranking. Additionally, sixth-ranked STV reported lower regional revenue for 2017, with a drop of about $10 million from last year’s $171.68 million total, to this year’s $161.12 million figure.

The top 10 firms reporting improved revenue from projects in the two states included fifth-ranked Gensler, with 2017 revenue of $171.27 million versus $169.53 million for 2016.

Seventh-ranked Stantec jumped to $152.57 million from $129.2 million. Eighth-ranked HDR reported a gain of more than $32 million from last year’s ranking to total $146.49 million. Langan, ranked ninth, saw regional revenue grow slightly to $142.2 million from $139.21 million. And 10th-ranked Arup posted a sizable gain, reporting $138.33 million versus $105.63 million a year ago.

There were notable changes in sector-specific rankings, too.

The Top 10 design firms in New York saw revenue remain near unchanged at about $1.61 billion. In New Jersey, by contrast, the top firms increased revenue by 5.6%, from $645.8 million to $682 million.

Revenue from commercial construction in both states grew from $257.33 million to $291.08 million, a 13.12% increase for the sector’s Top 10 design firms.

In Demand

Overall, designers active in the New York and New Jersey construction markets mostly expect to see a robust level of demand for their architectural and engineering services moving forward.

Joshua Zinder, principal at Princeton, N.J.-based JZA+D, says his firm is experiencing significant growth particularly in the multifamily residential and academic markets.

“We currently have at least five ongoing multifamily projects—a significant increase over last year, and our fastest recent growth in any sector,” Zinder says. Assignments for higher-education projects are also making JZA+D “markedly more active,” he adds.

Also testifying to the educational sector’s positive momentum is Craig Tooman, principal at CTA Architects, who reports his firm’s greatest degree of growth coming from this sector.

“Not only has there been an increased push in renovating existing spaces to provide additional classrooms,” Tooman says, “but we have also seen an increased push to design and construct entirely new educational facilities.”

The residential and higher-education sectors are also seen as especially strong by Donald Benvie, president and CEO at Tectonic Engineering & Surveying Consultants in Forest Hills, N.Y.

Along with those markets, Benvie says the “greatest opportunities” for Tectonic are in the institutional, transportation and wireless communication sectors.

Additionally, John Cutsumpas of Lothrop Associates expects the government, housing and health care markets “to continue to be strong over the next year.”

On the vertical construction side, the transportation market looks to continue forward with robust contracting activity and a “huge upside,” according to Peter Glus, senior vice president of Arcadis.

“Here in New York, we are seeing large-scale investment in transportation infrastructure, including program management and design services opportunities with Port Newark and with each of the three major New York City area airports,” Glus says.

In addition, Glus sees “significant disruption” coming from the adoption of fully autonomous vehicles, which could equate to 15% of new sold cars sold in 2030, he says. In anticipation, Arcadis “recognizes the importance of staying in tune with the rapid advancements in transportation” and is focusing on positioning itself and its clients “for success in a driverless future.”

Benvie, with Tectonic Engineering, backs up that assessment of the future impact of autonomous vehicles.

“Our workload with development of wireless cell sites for cellular phone carriers is being driven by the ever-increasing need to transmit huge amounts of data and the development of autonomous (driverless) vehicles,” he explains.

He adds that “as driverless vehicle technology continues to develop, the need for real time transmission of information with no lag time will necessitate the buildout of additional cell sites, both conventional and micro.”

Tariff Impacts?

The potential impact from the Trump administration’s increased tariffs on imported steel and other materials may stand as a caution flag for future market opportunities, the executives say.

Noting that his firm’s usually “steady stream of hospitality and retail projects” has slowed, Zinder says, “The tariffs being implemented are definitely causing concern.” 

The potential impact of the tariffs looms as construction prices “are already going up, apparently as a hedge against inflation,” Zinder points out. He adds that  “the signals suggest an imminent inflation crisis, which could cause projects to stall.”