Architecture firms in the United States recovered in 2015, after the Great Recession had created dramatic downturns for the profession in 2008. The AIA Business of Architecture 2016 Firm Survey Report reveals that more than 90 percent of today’s firms report profits, with more than a fifth reporting a high profitability of over 20 percent. Insights from their clients can help direct and inform where the future is going—and how to invest profits and thrive regardless of market conditions.
If we juxtapose the AIA Clients Insights Report against this Firm Survey Report (both released in 2016), we can see the thinking of building owners in the three largest nonresidential building construction sectors— education, healthcare, and office—and whether firms are lined up to meet these clients’ needs.
While good relationships lie at the heart of success across all professional and personal ventures, the design and construction industry is one that is fundamentally built on strong relationships. Architects and their clients agree on the critical nature of these relationships, and their business reporting confirms a substantial amount of repeat business within the profession. Architecture firms that specialize on commercial report 78 percent of their work comes from repeat clients, and those that specialize on institutional report 74 percent of billings comes from repeat clients. Confirming this, 83 percent of office, education, and healthcare owners report that previous firm experience is extremely important when they select an architect for a job; in fact, it is the factor that ranks higher than any other in their selection process, including value, cost, and reputation.
Accordingly, fostering these architect-client relationships should be a priority, and education-, healthcare-, and office-building owners provide some insights into what architects need to do in order to achieve success in these sectors:
Involve firm leaders in project proposals and at the outset of projects. Seven in 10 owners noted that—above all other factors—firm principal involvement is a very important qualification they look for during hiring. Notably, it is deemed more important than referrals and much more important than a low-cost bid or proposal.
Focus on what owners prioritize in their decision-making. When forced to choose, most owners in these sectors (58 percent) want architects to understand the performance of their buildings and the impact on occupants. Of the remaining 42 percent, more than half of them (24 percent overall) prioritize architect knowledge of their organizational goals and culture. While it is always preferable to discern what matters most to a particular client, the importance of the occupant was reinforced by several findings of the client insights survey. Therefore, architects would significantly benefit from framing discussions around experience, function, and performance—perhaps even more so than the visual aspects of their work.
Highlight what clients explicitly want, and demonstrate collaborative approaches. Architects and clients both acknowledge the breadth of what today’s client is looking for from an architect, reflected by architecture firm structure and the importance of services to clients.
Diversify Service Areas
Architecture firms are becoming more multidisciplinary as they take on a larger breadth of services such as engineering and interior design, once less prevalent in-house offerings. In 2015, 42 percent of architecture firms were multidisciplinary, while those that were single-discipline remained at slightly over half (51 percent). This is dramatically different from the firm structure we saw in 2008—before the recession—when less than a third (32 percent) were multidisciplinary.
Larger firms are even more focused on a multidisciplinary approach, with 82 percent of them with more than 100 employees in 2015 identifying as multidisciplinary. Shops with nonresidential specialties also show a greater affinity with the multidisciplinary moniker than those with a residential focus. Reinforcing the expanded nature of services is the share of architecture firm revenues that are pass-through (that is, revenues received from a client for services performed are passed directly to the consultant or subcontractor). In 2015, 30 percent of billings were pass-through, reflecting that firms are increasing the revenue they pass on directly to their specialty contractors. The most commonly used consultants include engineers (with 88 percent of firms using structural engineers; 84 percent using mechanical, electrical, and plumbing engineers; and 77 percent using civil engineers) and landscape architects (60 percent). Fewer firms (likely due to in-house expertise), but a notable share, contract with interior designers (36 percent of all firms), lighting designers (33 percent), and cost estimators (30 percent).
Education, healthcare, and office owners want their architects to perform a series of services for them, likely influencing the increase in the number of multidisciplinary firms. While the traditional architecture work of delivering high-quality design and documents is extremely critical, clients also place a high importance on a number of other services they want from architects.
First, these owners want expertise from their architects—nearly nine in 10 (88 percent) want architects to bring in expertise they are missing in-house, and nearly as many (82 percent) want architects to develop innovative project solutions.
Second, owners want their architects to help them meet their budget and timeline constraints—85 percent place a high importance on designs that meet budget, 81 percent want designs that will have easy and cheap maintenance, and 78 percent want architects to adhere to schedule.
Finally, clients want architects they can trust to be their advisers and partners throughout the design—but also construction—phases of projects: Nearly four in five place a high importance on architects serving as their advocate, two-thirds (67 percent) want them to facilitate interactions with the construction team, and nearly as many (63 percent) want them to lead the design and construction team.
Currently, clients report high satisfaction with their architects across all these service areas, suggesting that owners do view their architects as important partners, agents, and advisers—not only as transactional service providers creating designs and delivering documents. Recognizing the importance that clients place on all these services can help architects strengthen their relationships or even expand services—and, with that, fees.
Clients Focused on Building Occupants
While architects certainly can transform building design—and have motivated and led the way—owner demand can also help accelerate markets. It is through their consultative relationships that architects can help advance areas that education-, healthcare-, and office-building owners are embracing—namely sustainability, occupant health, and flexible spaces for interactive design.
These owners are highly oriented toward their building occupants in terms of the factors that they are planning to include in projects over the next three years, namely safety, occupant satisfaction, and thermal comfort. Those factors are also deemed very important to more than 90 percent of responding owners.
At the same time, owners also want projects that reflect their design aesthetic and help them be profitable. For example, almost nine in 10 office (87 percent) and healthcare (89 percent) owners rate ROI increases as very important aspects of their projects, and nearly as many education owners (87 percent) report enrollment growth as very important.
Over the next three years, these owners are highly committed to realizing energy efficiency, overall health, and improved social interaction in the attributes they want for the projects they commission. Specifically, 87 percent definitely plan to have energy-efficient systems in their building projects, and 73 percent are including continuous metering and building controls. And these numbers are even greater if you add in the share of owners that might include such features. As for health, it is the second-most reported feature that owners want in their buildings (at 84 percent). Social interaction and flexibility are also important, with 75 percent of owners planning spaces for social interaction and collaboration in their projects and 72 percent planning adaptable design elements to enable multiple uses.
This research suggests that architects and other industry players should highlight the ways they can address these important areas of efficiency, health, and flexible design in proposals, client meetings, and design and project work. Given that the owner looks to architects as experts and innovative solution-providers, it would behoove firms to ensure they have expertise to address these needs in-house or to find partners that can help them provide it.
Firms do seem to be aligned with their clients, especially as it relates to energy performance. A majority of firms of all sizes are using energy modeling—either internally or through the use of an outside consultant. Nearly three in five large firms (with 50 or more employees) are using energy modeling for at least some billable projects, while smaller firms are mostly requiring this function from outside consultants. Midsize firms (20 to 49 employees) are a mix of those that use energy modeling for billable work (18 percent) and those that require outside energy analysis (37 percent).
BIM is also becoming standard across the industry—enabling a better visualization of design and improved project efficiency. While nearly all larger architecture firms with 50 or more employees (96 percent) use BIM on billable projects, it is also used by midsize firms (72 percent). Owners are also embracing BIM, and want this to be a service that architects provide—84 percent of education owners, 90 percent of healthcare owners, and 80 percent of office owners report using BIM on at least some of their projects. Owners mostly see its value at the design phase, but office and healthcare owners also see its value throughout the construction process.
As our market conditions inevitably shift over the next couple of years, insights from clients can help architecture firms prepare for the future. Clients no longer view their architects as only suppliers of beautiful and safe building designs. The largest nonresidential owners report that they want their architects to be trusted partners and advisers who listen, work collaboratively, and provide expertise, as well as innovative design solutions.
Most notably, these owners want to see a focus on the eventual function and performance of their buildings—as it relates to occupant experience and health, building energy performance, and financial building performance. If architects can address these needs, as they continue to foster and strengthen their client relationships today and throughout the life of a building, they will be in a much stronger position to weather any coming storms.