...solid. “I am hearing more economists say the American economy has turned the corner and is growing again,” says Glenn Bell, CEO of Simpson Gumpertz & Heger. “I am hopeful that in 2011 or early 2012 we will see a major recovery.”
Other firms are skeptical of positive predictions. “What you hear from economists is so diverse that you can’t make a reasonable prediction. You have to be prepared for anything,” says Paul Yarossi, president of HNTB Holdings. “People are rooting for a better market in 2011, but that comes more from optimism than actual signs of a turnaround,” adds Greg Graves, CEO of Burns & McDonnell.
Some firms believe any recovery will be slow going. “We are beginning to see some signs of activity, but I don’t think we are going to see a V-shaped curve in the recovery,” says Bob Giorgio, president of CDI Engineering Solutions. “Recoveries usually are spurred by consumer spending, but the baby boomers are not spending the way they have in the past,” says Craig Martin, CEO of Jacobs.
The overall trend among large design firms was downward, with architects being hardest hit. “Everybody took a hit this past year,” says Phil Harrison, CEO of Perkins+Will. He says his architecture firm didn’t suffer as much as others, but it did have a series of layoffs over the course of a year. “Some architects that were heavily invested in the developer markets saw the bottom drop out all at once,” says Harrison. Some ended up laying off as much as a third of their staff in a matter of weeks when the financial collapse hit, he claims.
Fentress Architects is one architectural firm that seems to have countered the depressed market. “It was more luck than anything,” says Agatha Kessler, CEO. The firm diversified over the past few years to guard against major market dips, but its growth in 2009 was sparked by four major airport contracts, including work at Los Angeles International, Raleigh-Durham, San Jose and Sacramento. But Kessler cautions that the good times will not last. “What was a two-year backlog two years ago is now down to eight months,” she contends.
A few other architectural firms benefitted from markets that weren’t as badly affected. SmithGroup’s Roehling says that although the firm’s health-care clients became more cautious while Congress debated the health-care reform bill, the market did not grind to a halt the way it did in 1994, when health-care reform was last debated.
Roehling and others say there is a lot of health-care work on the drawing board that should become a reality soon. “Health care has always been our biggest design market, and the private-sector side has dropped off a little,” says Bill Heitz, Heery International CEO. A boost in the firm’s military and Veterans Administration hospital work has compensated for the falloff.
Cannon Design has benefitted from stable markets. “We are heavily engaged in the health-care and education markets, both in the U.S. and Canada,” says Gary Miller, the firm’s CEO. He says that, while those markets have softened a bit in the past couple of years, “health care has demographics working for it, so that market should take off soon.”
Executives point to the unwillingness of banks and other lenders to finance new projects as a key obstacle in jump-starting markets. “There is some lending, but banks are much more conservative,” says Harrison. “It is not frozen like last year, but only properties worthy of financing are getting considered.”
Banks are under their own forms of pressure when it comes to project financing. “Friends who are bankers tell...