In fall 2008, nearly every project in Cunningham | Quill’s coffers went cold. Clients who collectively were planning to spend millions on single-family homes suddenly didn’t want to, even though they had the financial means. And as we know now, developer funding dried up almost overnight. One 20,000-square-foot office/church project sat as a hole in the ground for the next year.
With projects languishing in various phases of development, founding partners Ralph Cunningham, FAIA, and Lee Quill, FAIA, checked in with their clients every few weeks. They sent gentle emails, but also began matching up projects with mortgage lenders who understood the value of their buildings. The forward momentum was its own reward, Cunningham says, but clients also appreciated the introductions.
Gradually, the Washington, D.C.–based firm’s clients regained their confidence. Over the next three years, construction costs dipped, projects were repriced, and almost all have come back to life, including the commercial project with a new investor. “We were not standing by passively waiting for the phone to ring,” Cunningham recalls. “We fought like hell to get the stuff built. For us it was a matter of survival, things crashed so hard.”
Today, despite the recession, the firm’s workload is steady, though slow. It seems to mirror what’s happening across the country. Statistics are not easy to come by, but anecdotal evidence suggests that, even as the economy improves, projects of all types are still sitting on the sidelines. At last check, the AIA’s Stalled Projects Database contained 36 projects worth roughly $1.2 billion vying for investor attention, and about 50 investors looking for a good match, though no deals had been struck yet.
Projects go on hold for various reasons. Multifamily projects can rumble along for years while programmatic changes, funding credits, and public processes are sorted through. But projects that stall because of the economy present an awkward challenge, especially for architects who have never experienced a prolonged recession. Quite often, it requires patience, perseverance, and a well-tended professional network.
New York City’s Resolution: 4 Architecture (Res: 4) has seen almost 20 projects peter out since 2007. At least half a dozen came back, half a dozen are still on hold, and just as many probably will never materialize, estimates co-principal Joseph Tanney, AIA. The firm splits its time between custom homes, prefab, and commercial and public projects, so when one project type shuts down, it turns its energies toward sectors where there is work. “Some people just want to see where the dust settles before pulling the trigger. We back off, but we don’t put the project too deep on the shelf,” Tanney says.
When the economy hiccups, so do clients. One large renovation project is back on track after pausing during this past August’s U.S. debt limit crisis. And when the market tanked in 2008, many of Res: 4’s clients started to rethink their options. “People planning for a new residence were finding that a lot with an existing home was cheaper than an empty lot right next door,” Tanney says. “They kicked the tires, then ultimately came back because what they were looking for wasn’t actually available.”
To get the ball rolling, Tanney often did quick studies to see if pre-priced projects could be built for less money. “Clients expected things to be cheaper than they were, so some projects were strung out until there was a comfort level with the reality of costs,” he says. Meanwhile, Res: 4’s emails announcing published work were meant to tantalize tentative clients. Some called to say they saw the project and looked forward to starting their own again.
With houses no longer the investment vehicle they once were, Reader & Swartz Architects in Winchester, Va., helps its clients get clear about their motivation for undertaking such an ambitious endeavor. “Before the recession, the longer you waited, the more the project cost,” says co-principal Chuck Swartz, AIA, LEED AP. “Now cost is pretty flat and there are many options, so it’s a little more muddled. It’s a higher hoop to jump through, and there’s a lot of wavering.”
Architect-client relationships take on new dimensions in a broken economy, agrees Seattle architect David Vandervort, AIA. “When you understand the psychology of what your clients are trying to do, you’re able to deal with them on a different plane,” he says. To accomplish that, the firm has had to rethink how it markets and delivers its services. Clients crave a predictable process, he says, and that means having as many challenges resolved up front as possible.
The firm regularly provides site consultations or home assessments to help clients decide whether to remodel or build new. And using ArchiCAD to move from loose sketches to 3D models helps clients visualize the possibilities before paying for a full construction set. To simplify the process, the firm also offers packaged collaborations with an interior designer or landscape architect.
Frequent code changes in the environmentally sensitive San Juan Islands offer David Vandervort Architects another opportunity to inspire confidence among landowners there. Regulations are becoming more severe to protect shorelines and habitats, restricting people’s ability to build on their property. “We send out marketing cards showing our work there, but also informing property owners of their changing land use rights, which can be upsetting if they’re not aware of them,” Vandervort says.
In Palmetto Bay, Fla., a number of Roney J. Mateu’s clients who purchased land put houses on hold even before starting. Firm members stay in touch with clients because usually they’ve become friends, but many times follow-up calls also are inquiries about whether they want to sell their land.
“I might say: ‘I have a client looking for land. It’s been a while; are you going forward or not?’” Mateu, AIA, says. “In most cases they want to wait it out, though there are a couple of folks in negotiations I’ve put together. It’s one way to generate work.”
Mateu also hopes to broker a deal with the landowner next door, who was in financial trouble after years of buying distressed properties. “He had made a lot of money but was 100 percent underwater on the lot,” says Mateu, who sent a proposal to design and build a spec house at a discount.
“Since the owner is in the development business, hopefully I’ll have a new client if I do a good job,” Mateu says. “He has the ability to fund the construction without getting a bank involved. Maybe we can make a bad deal less of a bad deal.”
eye on the prize
In a difficult construction market, architects of mixed-use housing are helping developers restrategize, too. Los Angeles–based Griffin Enright Architects spent years designing a multifamily project that is now being repurposed as a boutique hotel. “Every once in a while we do more drawings to help them gain partners,” says co-principal Margaret Griffin, AIA. “Because we work in a timely manner, when we do check in occasionally it’s just to remind them that we’re there for support.”
Waiting for projects to commence is second nature for Studio E Architects in San Diego. It routinely deals with tax-credit-financed multifamily projects, a competitive process whereby clients chase a pot of development funds, sometimes for years. These days, though, the architects let clients know they’re available for additional services that might boost their chances of winning. “In some cases we’ve said we’ll collect that fee when you’re awarded the tax credits,” says principal John Sheehan, AIA. “We’re willing to wait but are not giving it away.”
A tight business network is critical to getting things done. Five years ago, Boston-based ICON Architecture designed phase one of a residential tower in New Haven, Conn. When the developer pulled away during phase two, ICON found a former client to take over the project, slated for construction this year. “Our former client couldn’t have been happier,” says principal Nancy Ludwig, FAIA, LEED AP. “They’re the fresh energy to come into the deal.”
Work also is proceeding on a 350-unit apartment building that was approved three years ago but stalled because of the economy. When ICON and its client pulled out the plans, they realized the units were larger than necessary and cut 50,000 square feet from the project. “That’s huge when you’re spending $300 per square foot to build a steel high-rise,” Ludwig says. The silver lining, she adds, is that a wider client network is being spawned out of the economic downturn. As businesses got squeezed and loyal clients moved on, ICON followed them to the place they landed.
Looney Ricks Kiss (LRK), Memphis, is one example of the industry shake-ups that have occurred since 2009. Lots of projects went on hold that year, many of them mid-stream. LRK tried to keep things moving by letting its best national clients defer payments. That contributed to the firm’s subsequent bankruptcy and downsizing—from 250 employees in nine offices in 2007 to fewer than 50 in three offices.
Now, stricter checks and balances head off such problems. If an invoice isn’t paid within 30 days, the architects pick up the phone to find out why. After 60 days, they may stop work. But even before accepting commissions, the firm deploys a rigorous checklist to gauge their strength. “We are very aware of market conditions that may affect the project,” says founding principal J. Carson Looney, FAIA.
Clients receive the same scrutiny. LRK ranks unknown entities based on a number of factors, such as their Dun and Bradstreet rating and whether they’ve mistreated previous architects. Looney calls it tough love. LRK did say no to several projects in the past year. “I remember we debated one project and said, ‘Yes, we could use the work but it’s not worth it,’” Looney says. “That hurt at the time. But we didn’t suffer for it.”
Cunningham urges architects to be proactive, forming alliances with bankers or mortgage brokers who are honest and know their work. And despite conventional recession wisdom, when Cunningham | Quill’s single-family clients dusted off their dreams, very few downsized. “The projects remained largely unchanged; our clients loved the designs and wanted to build them,” Cunningham says. “I think we did our best work ever during this recession because we managed to get these things built.”