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Sunday, 06 January 2013 23:06

Architecture Billings Index up, ABC outlook positive for West Michigan

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WEST MICHIGAN — The call for design services continues to rise across the country as the architecture industry keeps clawing its way back to life.

 

In its Architecture Billings Index released in late December, the American Institute of Architects’ November report showed the “strongest business conditions” seen since 2007, according to Kermit Baker, AIA chief economist.

November’s ABI score came in at 53.2, up from 52.8 in October (any score above 50 indicates an increase in billings). The increased demand for design services is also up in the Midwest at 54.4, the second highest among the geographic regions surveyed.

Locally, architecture firms are seeing the benefit of those upticks and putting in more hours at the drawing board.

“Personally, I’m busier than I have been ever,” said Brian Swem, president of the AIA Grand Rapids chapter and architect at Lott3Metz Architecture. “This is probably one of the best years I’ve been a part of as far as workload goes.”

With an increase in urban development, projects are stacking up and more diverse firms with a variety of project experience are taking off, Swem said.

“In talking to people in Detroit, they aren’t experiencing the same kinds of gains we are here in Grand Rapids,” he said. “In West Michigan, things are exploding and it’s outstanding.”

In September, MiBiz reported that mergers and acquisition activity among architecture firms spiked in the West Michigan market. At the center of the shift was a thin project market coming out of the recession that spurred many of the moves. At the time, larger firms were looking to add value and diversify their range of services, while smaller firms scrambled to reduce overhead or to partner.

Today, sources say the storyline for area firms has turned the corner on the previously bleak market realities.

“For the last few months and toward the end of this last quarter, we’ve generated a lot more leads and projects,” said Tom Tooley, vice president of Grand Rapids-based Concept Design. “We’re seeing a bit of backlog that was really unrealized for the last few years.”

Tooley’s previous firm, Serve Studios, was one of the companies that participated in a merger when it joined forces with Concept Design Group.

Much of the work Concept Design is doing now stems from primarily private investment in building rehabilitation, adaptive reuse, office renovation and some new construction, Tooley said.

Also in December, the Bureau of Labor Statistics released its monthly jobs report, showing the U.S. economy added 146,000 jobs in November. More specifically, the architecture and engineering services segment added 2,400 jobs, which is up from October’s increase of 1,500 jobs.

For 2012 there are approximately 30,000 more people employed in architecture and engineering than at the same time in 2011.

These numbers have come a long way back since 2008, when the industry saw its workforce cut by almost two-thirds, according to Swem.

The BLS report also indicated that the construction industry lost 20,000 jobs in November.

However, Anirban Basu, the national economist for the Associated Builders and Contractors Inc., believes that despite the numbers, the industry outlook for 2013 is still rather positive, he told the organization’s West Michigan chapter at its economic outlook luncheon in December.

In a third quarter report for 2012, ABC’s National Construction Backlog indicator shows companies reporting eight months of work on their books.

With housing starts and multifamily building leading the way, residential construction spending is up across a number of West Michigan markets. Battle Creek, Muskegon-Norton Shores, Kalamazoo-Portage, Holland-Grand Haven and Grand Rapids-Wyoming all saw rather modest upward gains in residential building in September, Basu’s report showed. The Grand Rapids-Wyoming and Kalamazoo-Portage markets also saw relatively meager gains in nonresidential construction spending, while nonresidential spending in the other markets dropped in a year-to-date analysis.

Looking ahead, Basu said as 15-year and 30-year mortgage rates continue to stay at “insane” lows and commodities prices remain stable, the building market in West Michigan could see an increase in momentum toward the latter half of 2013.

“Despite all kinds of uncertainty coming out of Washington, we can still see signs of improvement,” Basu said. “However, margins continue to remain very thin.

“Residential construction is rebounding in West Michigan, but nonresidential is a little choppier.”

At Progressive AE, the architecture firm that merged with Design Plus last year, clients are starting to emerge with new projects and projects that were put on hold when the economy fell into recession, said Jim Horman, practice leader and architect for Progressive.

The company is seeing increases in health care work as many providers are making investments in acute care and outpatient facilities as well as senior housing and assisted living projects.

“Next year looks very, very good,” Horman said. “We’re feeling very positive for the next six to nine months.”

Read 2912 times Last modified on Friday, 25 January 2013 10:31

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