Projecting demand for architectural services can be challenging, but it’s not impossible. With a little effort and a little data, architects can anticipate and respond to shifts in the market before they happen.
A few top-level numbers can be used to gauge broad market trends. The U.S. prime interest rate should be on every firm’s radar, since it affects what banks can charge for construction loans, says Saskia Dennis-van Dijl, a business and development consultant at the Cameron MacAllister Group, in Orinda, Calif. “That has a huge impact on the volume of construction because there’s no work delivered without some form of a loan,” she says. Monthly housing starts is another figure to watch, she adds, to help spot areas of new activity where commercial development may follow.
The job-growth and unemployment rates, along with housing prices, are also worth tracking, says AIA chief economist Kermit Baker, Hon. AIA. Firms can use the AIA’s monthly Architecture Billings Index to determine how their activity stacks up industry-wide. Monitoring these reports can be made a simple routine. “An administrative person at a firm could do that in 30 minutes a month,” Baker says.
Digging into Data
For larger firms, brokered data may be worth the price. Michael Johnson, AIA, design principal at Carrier Johnson + Culture, in San Diego, says that his 85-person firm consults at least quarterly on active and potential markets using paid data from real-estate services firms like the CBRE Group and Jones Lang LaSalle. They also access local data through their involvement in organizations such as the city’s Regional Economic Development Corp. and the Downtown San Diego Partnership. City-specific reports can show, for example, the volume of office space in use and how space needs will change in response to economic conditions. This data can also help firms determine when and where to take on new work, Johnson says. Knowing where the healthcare field was headed in California and nationwide, for example, informed his firm’s decision in May 2015 to add a division to service that sector.
Firms don’t have to shell out for detailed data, however. For example, spending time internally tracking what a firm has spent on materials and their overall job costs over time can reveal trends, like the growing use of one product in place of another, while helping firms differentiate and saving clients money on products. “You can anticipate a surge in a specific kind of construction type as a result of broader economic changes,” says Michael Liu, AIA, vice president and principal of The Architectural Team, in Chelsea, Mass.
Ultimately, becoming an expert in the markets your firm serves is the best way to track their trajectories, says Stephen Epstein, a management consultant at Strogoff Consulting, in Mill Valley, Calif., and a former principal at New York– and Los Angeles–based Pfeiffer Partners Architects. “You read the newsletters and you talk to other professionals and engineers,” he says. “It’s through those relationships and by being in that focused sector for so long that you get a vision of what’s coming down the road two or three or four years out.”
The AIA’s Baker concedes that data can only reveal so much, especially in a field as nuanced as architecture. What affects firms working in one sector might not impact those in another, while other markets are more closely linked. “Understanding historically what those relationships have been is the starting point,” he says.
No single piece of information will help an architecture firm see what’s coming next. But by combining a few simple numbers, more detailed data, and a bit of hard-won expertise, firms will be better positioned to see and respond to what’s on the horizon.