It's deep into the normally quiet month of December—only a few days before the holiday—but lighting designer Jim Baney is at work on several lighting-design proposals for the coming year. His partner Bob Shook is, too. “The last three or four months have been very strong,” says Baney, a partner at lighting-design firm Schuler Shook's Chicago office. “Our workload has picked up. We're more optimistic going into the new year, based on the proposals we're writing, the ones we have outstanding, and the ones that have come in.”
Like Baney, the lighting community is experiencing an emotion that had become rare during the recessionary gloom of the past several years: optimism. With owners and developers cautiously restarting stalled projects and launching cost-saving energy retrofits, both lighting designers and lighting manufacturers are predicting more opportunities for the industry in the year ahead.
“We did start seeing, at least six months ago, a much greater increase in the number of RFPs for projects,” says Stephen Lees, senior principal for Horton Lees Brogden Lighting Design, a 50-person firm with offices in New York, Boston, Los Angeles, and San Francisco. Some of that business is coming from owners who are restarting design for projects that have been on the boards for several years, he says. But while work is increasing, he is quick to point out that it is erratic. “It feels like we need to hire 10 staff one day, and then the next day you wonder if you can keep everyone busy,” he says.
While recent business has been strong, projecting work time lines further than three months out is mostly guesswork, Lees says. Both designers and manufacturers are tracking the American Institute of Architects' Architecture Billings Index (ABI) for clues on whether or not the construction industry is truly emerging from the slump. While the ABI has been volatile over the past year, falling to a low of 45.1 in July (scores above 50 indicate an increase in billings), and rising to a high of 52 in November, recording its strongest monthly gain since the end of 2010, and remaining the same in December.
In its semiannual Consensus Construction Forecast, a survey of the nation's leading construction forecasters, the AIA projects a 2.1 percent rise in spending in 2012 for nonresidential construction projects, and a 6.4 percent increase in 2013. Rebounding corporate profits, increased capital spending, record-low borrowing costs, and pent-up demand for commercial and retail projects will factor into the growth, according to the forecast. The hotel (10.2 percent growth), industrial (6.0 percent), retail (5.0 percent), and office-building (4.3 percent) segments should lead the way in 2012. Institutional segments (-0.1 percent) likely won't see growth overall until 2013, although the religious (5.1 percent) and health (4.5 percent) sectors could be bright spots.
While the November and December ABI results were encouraging, AIA chief economist Kermit Baker, Hon. AIA, urged a bit of caution in his report on the November ABI, noting the results were “reminiscent of a year ago, when firms reported a strong fourth quarter of 2010 only to see business conditions deteriorate once the economy began to soften toward the end of the first quarter.” Nevertheless, 42 percent of architecture firms expect revenues to increase by at least 5 percent from 2011 levels, while only 27 percent expect revenues to decline, according to the report. Overall, firms are forecasting revenue gains averaging just below 2 percent for the year. Larger firms (with annual revenues in excess of $5 million) expect to do a bit better than average in 2012, anticipating revenue growth of 3.2 percent on average, compared to 1.6 percent growth for firms with revenues of less than $1 million.
Growth Opportunities
Revenues in 2012 should build on the strong second half of 2011, predicts Michael Gehring, partner and CEO of Kaplan Gehring McCarroll Architectural Lighting, a 15-person firm in El Segundo, Calif. Many of the opportunities he sees are driven by private-sector work, particularly multifamily housing, renovations and expansions of hotels and retail malls, and companies consolidating or redesigning office space. “Our gross revenues in 2011 are about the same as in 2010,” he says. “But it really accelerated at the end of 2011. If that continues, and we think it will, then it'll look better in 2012.”
All of the designers we spoke to note that a growing issue is holding the line on fees when clients demand more services. “Our workload is becoming more comprehensive,” says Nelson Jenkins, principal of Lumen Architecture, a five-person lighting firm in New York City. “The requirements we're being asked to do, such as energy calculations, are increasing.” At the same time, he says, the fee structure is very competitive and still hasn't caught up to pre-recession rates.
“It feels like we need to hire 10 staff one day, and then the next day you wonder if you can keep everyone busy.”
—Stephen Lees, senior principal, Horton Lees Brogden Lighting Design
That's a challenge, particularly when clients expect work using expensive technologies such as Revit or 3D walkthroughs, Lees notes. “It takes time and more capital expense to work in Revit, but no one wants to pay any extra for it,” he says.
In addition to looking for new work in the traditional places—servicing existing clients and attending industry events, trade shows, and awards programs—Baney says that his firm is also looking for other revenue streams. His firm has explored finding new work in low-resolution imaging and media façades as well as in product design, working with an architect or manufacturer on a custom fixture. The firm is also looking for ways to work on a project without getting involved at the full-scale, full-service level. “Maybe [for] some projects, we'll just do a few hours, only get involved through design development,” he says. “The project is better than with no input at all. We're open to working that way, bringing a little bit of a lighter touch.”
Lees, too, says that his firm is flexible about work arrangements—the firm is open to bridging documents or taking on just the first or second half of a project—but with certain limits. “We will not pick up a project in CA [construction administration] or the middle of CDs [construction drawings],” he says. “If we are involved just in the schematic or DD [design development], then we include a hold-harmless clause,” to protect the firm from future changes to its work.
