The process that brings new office buildings, schools, commercial centers and civic or government structures into the construction pipeline has been temporarily stalled by tight money and sidelined investors.
So, what does the future hold for those involved in the design and construction of tomorrow’s signature buildings or urban centers — the architects, contractors and engineers who make them possible?
The answer will take months — even years — to determine.
Meanwhile U.S. construction spending on a year-over-year basis dropped by 13 percent during September and industry unemployment topped out at 18.2 percent during July. Facing a smaller pool of projects during the coming year, construction-related businesses are focused more than ever on what’s coming down the project line.
State, local and federal jurisdictions, public and higher education institutions, and transportation departments have generated most projects since mid-2007. Private sector starts — traditionally accounting for 70 percent of all construction, according to the Associated General Contractors of America — have been fewer, squeezed by a commercial lending tourniquet.
With billions, even trillions, of dollars in business at stake, the industry is trying to ride out a stubborn recession. One key indicator they’ll be watching is the American Institute of Architects’ Billing Index.
Architects and contractors traditionally enjoy a symbiotic relationship. The architect designs houses, office buildings, skyscrapers, landscapes and even entire cities, providing the platform, the trigger, for the majority of new construction.
A leading economic indicator of construction activity, the ABI takes into account the lag time — usually a few months to a year or more — between architecture billings and construction spending, according to industry analysts. Compiled based on a monthly survey of American Institute of Architects’ member firms, the data reflect whether companies are reporting higher or lower billings, with “50” considered an equal number.
Fortunately, ABI reports for August and September provided contractors some reason for guarded optimism, but fell far short of September 2007’s healthy 59.1 index.
This September’s rating was 43.1, up from 41.7 during August.
“This score, however, still indicates a decline in demand and design services,” said AGC chief economist Ken Simonson.
AIA Colorado Executive Director Sonia Riggs sees the ABI is a key indicator, but said her members also keep an eye on the organization’s job board.
“There’s not a lot of hiring going on, but things are not getting worse,” she said. “I’d describe the market for new projects as flat right now.”
Stuart Coppedge, an architect with RTA Inc. in Colorado Springs and the 2009 AIA Colorado president, described the past year as “tough for all,” especially for retail projects which entered a “freefall” during late 2008.
“So far, 2009 has been better for those of us who do school design,” he said. “We’re currently working on a project approved last year, but few, if any, school districts will have bond issues in 2009 for 2010.”
RTA specializes in retail as well as educational and health care work, and Coppedge admits health care has also been slow.
“But we’re cautiously optimistic — especially new medical office and ambulatory surgery centers,” he said.
Some smaller firms, dependent on commercial work, are experiencing the greatest struggle, he said.
“If their projects don’t come in, they can really be hurt,” he said, adding that some architects who have been laid off by larger firms are seizing the moment to start their own practices or to partner with former associates.
“There’s a little reshuffling going on,” Coppedge said. “It’s even affecting our AIA membership, so we’re not raising dues this year. For 2010, we hope we can maintain.”
Greg Friesen, principal architect with CSNA, a local firm that specializes in public and higher education buildings, correctional facilities, hospitality structures and commercial projects, said his company has weathered the economic storm, so far, but he doesn’t take a near-term turnaround for granted.
“It’s all about relationships, about the people you know,” he said, adding that his firm’s business will be off some from last year — even with several large projects under way.
CSNA was not contacted for information to be included in the Billing Index. “Indices and metrics like these are interesting in the way they represent general trends; there are always exceptions to those trends and we count ourselves lucky to be among firms that continue to do well in a tough market,” Friesen said.
The firm doesn’t limit its market to the Pikes Peak region, however. Two of its largest projects — the preliminary design for a $48.5 million undergraduate science facility in De Pere, Wis., at St. Norbert College and an $18 million undergraduate and rare book library in Minnesota — require regular travel and coordination.
“We’re actually very competitive and stronger out of state than in-state,” Friesen said, adding that through a consulting partner, the firm also recently won another major job in Wisconsin.
In Colorado, the firm is completing a middle school addition and renovation in Denver, and a “significant” criminal justice facility in Canon City, as well as projects for El Paso County, a local school district and continued renovation projects at The Broadmoor.
In this climate, smaller jobs help keep employees on the payroll.
Harder-hit, Friesen said, have been architectural firms that depended mostly on developers for new business.
“There’s not much going on in that arena because there’s no financing,” he said. “Could things be better? Sure, but we’re in ‘the glass is half full’ crowd, and, if you think about it, some of the most remarkable wines in the world are never served by the full glass.”
Associated General Contractors of Colorado executive director Michael Gifford summed up the challenge ahead for his organization’s 375 members who do the “majority of the state’s commercial building construction.”
“We’re seeing commercial contractors and subcontractors off 10 to 40 percent in business already booked for 2010, depending on their niche. Some hospital work and energy-related projects are still strong, but high-rise residential, retail and commercial office builders are more likely to see 20 to 40 percent declines,” he said. “If you look at that index, earlier this year it went into the 30s, but is back up. The fact that the ABI has gone into the mid-40s is showing signs that we’ve hit bottom. Once architects are hired at an increasing rate, we’re still looking at a 12- to-18-month lag before construction begins.”