Productivity at architecture firms should improve in coming
years, spurred by improving economy and more experienced staff
By Kermit Baker, Hon. AIA - AIA Chief Economist
Business conditions at U.S. architecture firms showed signs
of stabilizing in April, however the month’s Architecture Billings Index score
of 49.6 still reflected a slight decline in billings from March levels once
seasonal adjustments were factored in. This is the fourth decline in the past
six months. Even while this protracted weakness in billings continues, there
are signs that growth may be around the corner. The inquiries index reading was
59.1, the strongest showing for growth in inquires so far this year. Even more
significantly, the new design contracts index for April was 54.6, the strongest
reading for this index since the AIA began tracking this indicator in late
2010. These figures suggest that new project activity is materializing at
architecture firms, but that progress on current design projects is moving at a
disappointing pace.
Firms in the Northeast and Midwest continue to report the
weakest business conditions. Scores at firms in both regions have been below
the 50 threshold every month since the end of last year. With an ABI score of
42.9 in April, firms in the Northeast are reporting the steepest decline in
billings since the depths of the last recession. Firms in the West reported a
decline for the first time since mid-year 2012. In contrast, firms in the South
are reporting accelerating billings, with the strongest gains since the last
construction boom.
By construction sector, residential architects continue to
report healthy conditions, while billings at commercial/industrial firms have been
essentially flat for the past six months. Billings at institutional firms,
while beginning to recover from mid-2012 to mid-2013, have now been negative
for eight straight months, with accelerating declines for the past two months.
Economy expected to
rebound from weak first quarter
The performance of the economy in the first quarter was
extremely disappointing, but widely assumed to be a result of severe weather
conditions across most parts of the country. The consensus is that the current
quarter and the rest of this year will look more like the 3.0 to 3.5 percent
growth in GDP seen in the second half of last year.
Recent payroll figures support this improvement. Net job
growth was at 288,000 in April, the best showing since January of 2012. Improvement
in the overall employment situation continues to boost construction employment.
Through the first four months of the year, 124,000 net additional construction
positions have been added to the industry, more than were added in all of 2012
and two-thirds as many as were added all last year.
On reason for the likely continued improvement in
construction jobs is the recent rebound in home building activity. Through the
first three months of the year, housing starts averaged 924,000 at a seasonally
adjusted and annualized rate. April numbers showed a strong rebound, as starts
jumped to 1,072,000, with most of the gain coming on the multifamily side.
Rising consumer confidence scores, reflecting consumers’ generally growing
comfort level with the economic outlook, should encourage further improvements
in the housing market. Consumer sentiment levels, as tracked by the University
of Michigan, are almost back to their pre-recessionary levels.
Firm productivity
projected to increase
Even with inherent measurement difficulties, it appears that
staff productivity at architecture firms—the output per hour of labor—has
declined during this past downturn. With lean workloads coupled with frequent
project delays, many firms have found it difficult to maintain the productivity
levels of their staff.
Moving forward, over three-quarters of architecture firms
expect productivity levels to increase over the next five years. Most others
expect productivity levels to remain fairly constant. There are many factors
that firms feel will affect future productivity levels. At the top of the list
(selected by over a third of firms as the single most important issue in
determining future changes in staff productivity) is the condition of the
economy/project workloads. In the view of many firms, growing workloads will
help to increase staff productivity levels. Close behind is the quality of the
staff/staff training at firms. Well over a quarter of firms (28.3 percent)
selected this as the single most important factor in determining future
productivity levels.
Firm investments in technology—communications equipment,
BIM, other software and hardware—was selected by more than one in every six
firms as the key to future productivity gains. Almost one in 10 firms felt that
firm management was the most critical factor in future productivity gains.
Other factors at the top of the list for future productivity gains: types of
projects that the firm worked on (suggesting that more familiar building types
could be designed more productively than if the mix were changing); range of
services and activities offered by the firm; and project delivery methods of
firm projects. The remaining 2.5 percent selected other factors as being the
key to productivity growth over the next five years.
This month, Work-on-the-Boards participants are saying:
General architectural work remains slow and stagnant, but
planning and specialized (historic preservation) work seems to be somewhat
steady and stronger over the past four months. —Six-person firm in the
Northeast, mixed specialization
Inquiries/RFPs are well above last year. However, selections
are slow, delayed, and projects are smaller than in the past. —170-person firm
in the Midwest, institutional specialization
The slowdown is definitely behind us. Finding qualified
staff is now our largest concern, followed closely behind by finding office
space for staff once we hire them. —36-person firm in the West, institutional
specialization
Business prospects have jumped over the past month. We still
need to secure them into approved contracts, but inquiries and conversations
are noticeably higher than they have been in a long time. —Four-person firm in
the South, commercial/industrial specialization
Source: AIA
No comments:
Post a Comment