The U.S. construction market remains mired in a recession, with few, if any, markets spared. In 2009, design firms looked for a turnaround this year, but so far there has been little relief. Industry companies now await a bounce back in 2011. However, leaders of the largest U.S. design firms, those on the cutting edge of any recovery, say there still are too many economic, political and financial uncertainties to predict when the marketplace will turn a corner.The impact of the industry recession can be seen on the ENR Top 500 Design Firms list. The Top 500, taken as a group, had overall design revenue of $80.02 billion in 2009, down 11.7% from 2008’s figure of $90.85 billion. Domestically, Top 500 revenue fell 13.1%—from $68.14 billion in 2008 to $59.22 billion in 2009— while revenue from projects outside the U.S. dropped by 7.3%, from $22.44 billion to $20.80 billion last year.
The industry falloff showed no favoritism when inflicting pain to design firms. All 10 major markets measured in the Top 500 survey showed a decrease in design revenue. Hardest hit were the industrial process market, down 40.2% in 2009 from 2008; general building, down 20.1%, and telecommunications, down 20.6%. Other doubt-digit losers were power, down 14.3%; petroleum, down 11.8%, and hazardous waste, down 10.4%. The remaining markets generally were flat, including water, off 0.2%; sewer and waste, down 1.3%; transportation, down 0.1%, and manufacturing, down 0.8%.
Of the 458 firms appearing on both this year’s Top 500 and the 2009 list, 323, or 70.5%, report a decline in design revenue, while only 135 saw it rise. Instances of large revenue increases are attributed to acquisitions.
The recession already has taken its toll among large design firms. Last month, Manalapan, N.J.-based CMX, which ranked No. 96 on last year’s Top 500, announced it was closing. Boston-based architect Cubellis Inc., ranked No. 189 last year, closed its doors last November, and Troy, Mich.-based Yamasaki Architects, founded by Minoru Yamasaki, designer of the World Trade Center in New York City, was shuttered in January. “Yamasaki went from 120 employees to nothing—a world famous firm gone,” laments SmithGroup CEO Carl Roehling.Related Links: Top 500 Design Firms List Complete Report
Many firms now have to rethink their expansion strategies that were developed in boom times. “A lot of firms that thought they would be an international superpower will have to decide whether they should give up their dreams of being a global player,” says Derish Wolff, chairman of the Louis Berger Group.
On the other hand, some global giants have benefitted from their international reach. “I am so glad we are global and in a variety of markets,” says Bill Utt, CEO of KBR. He says that in the U.S., refinery work is off because of excess capacity and weak demand, but the international upstream oil-and-gas market has surged with the increase in oil prices.
KBR’s 2008 acquisition of Birmingham, Ala.-based BE&K helped to expand the parent firm’s markets and prompted a transition and realignment within the company. “We are now organized into 13 business lines,” Utt says, noting a clearer business model and greater accountability. “We have good business prospects in all our lines,” Utt adds.
Design firms continue to search for signs of revival in the market, but none are willing to point to anything...