In recent months, most U.S. architecture firms have had their revenues stabilize, one of many signs that the steep construction downturn may finally be ending. The past few years have been extremely challenging for most firms, however, as the AIA’s 2012 “The Business of Architecture Report,” which surveyed 2,805 AIA-member architecture firms, shows all too clearly.
Total construction spending levels, which exceeded $1 trillion in 2008, fell to under $800 billion by 2011. With less construction came less building design. Moreover, many owners and developers more aggressively managed design and construction costs of the projects that were built, creating pressure on design fees and construction bids. As a result, gross revenue at architecture firms declined 40 percent between 2008 and 2011, from more than $44 billion to $26 billion, according to the firm survey, last conducted in 2009.
Such a significant revenue drop produced a comparable reduction in employment. Between 2007 and 2011, construction industry payrolls declined by more than 2.1 million—almost 28 percent—double the number of positions added during the 2003–2007 upturn. Architecture firms experienced a similar employment loss: Between 2007 and 2011, more than 28 percent of positions disappeared, a share that greatly exceeded the gains during the earlier upturn.
The average number of payroll employees at a typical firm fell from 10.3 in 2008 to 8.8 in 2011. Currently, according to AIA estimates, almost a quarter of architecture firms nationally are sole practitioners, and more than 60 percent have fewer than five employees on their payrolls. Net revenue per employee averages almost twice as much at large firms than at small firms. In part this difference reflects the greater use of part-time staff at small firms, but it also most likely reflects higher fees charged at large firms, as well as higher levels of staff productivity due to generally greater capital investments.
Despite having fewer employees, the typical firm expanded its design services during the downturn in the pursuit of new work. Indeed, a higher number of firms reported that they offered such services as sustainable design, planning, interior design, and space planning.
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