Good news for architects, at least in Boston: According to a new survey, Boston firms are starting to see a healthier market for business.
Accounting firm CBIZ Tofias conducted its 2012 Architectural Survey and found that both the profit per hour and the direct labor utilization rate (percentage of time worked on billable projects) increased over 2011’s numbers, which were already a slight improvement over the three previous years. But the 2011–2012 increase wasn’t huge, David Swan, the report’s author, told The Boston Globe:
The architecture industry in the Greater Boston area is showing encouraging, though not significant, signs of improvement. The health of the architecture industry can be construed as a reflection on the state of the real estate market as architecture is often viewed as a leading indicator.
Profit per hour averages increased from 2010’s $5.54 to $6.89. Direct labor utilization rate increased from 2010’s 61.4 percent to 62.4 percent. The report found that the most profitable firms in the survey had a direct labor utilization rate of over 65 percent in 2011.
The bad news in the report is that firms’ overhead rate hasn’t dropped along with the other numbers. In 2007, it was $47.27; and in 2011, it was $59.09 per direct hour, reported the Boston Business Journal. In order to effect overhead-rate change, the report does have some advice:
To achieve these higher profits again, firms need to increase revenues, which continues to be a challenge during these economic times, or reduce their overhead costs. The most effective way to reduce overhead is to shift labor costs from indirect to direct by either increasing revenues or reducing staff size to better match the level of revenues.