Time has passed, and the news media are still wailing about the economy. Energy and food prices are high, job growth is sluggish, foreclosures abound in some areas, and the lending industry is in turmoil. It's hard to tell exactly how bad a shape we're in overall, and so far the National Bureau of Economic Research has avoided the R-word. But recession or not, there is real pain in many of the sectors architects serve. Even firms whose work continues to flow reassuringly must contend with the fallout of a malaise-filled market. Many architects report that business is just fine. But that doesn't stop them from worrying about what the next six months may bring.
This is an uncertain period for architects, but also an interesting one, as market trends shake out in response to production housing's spectacular fall and the new energy realities. While the economic effect on architects varies widely by region and project type, many are doing what good entrepreneurs everywhere do in turbulent times: sticking with what works while tracking new opportunities, revisiting their business plans and networks, and providing stellar design service.
Let's start with the good news. Small firms in high-end markets and thriving urban areas seem to be faring the best in this flagging economy. They're agile enough to get by on a couple of big-ticket jobs at a time, and their clients have enough ready cash to rise above the mortgage mess, selling an existing home at a discount, if necessary. In the booming Dallas area, for example, Frank D. Welch, FAIA, says he's never had a strategy for downturns; work has always come. “I have three architects working for me, and we do large, expensive modern houses,” he says. “I haven't seen anyone cancel a large residential project.”
Ditto in Minneapolis, where Jean Rehkamp Larson, AIA, a principal of Rehkamp Larson Architects, is trying hard to see the downturn. “It's interesting to drive into work listening to NPR forecasts, get here, and have a full plate of things to do,” she says. On the boards are new houses, cabins, and remodeling projects ranging in budget from $200,000 to $2 million. Still, there are signs of unease. One project was put on hold when the husband's employer announced layoffs, and clients doing homes in the $1.5 million range are required by banks to come up with more cash than they'd like. Recently, a bank assessed a cabin's value at 25 percent less than the construction cost, causing the client to simply downgrade some appliances. But though day-to-day workflow seems healthy, anxiety lurks beneath the surface. “We're small enough that the workload stays steady, but the downturn certainly affects us emotionally,” says Rehkamp Larson, who, with spouse/co-principal Mark Larson, AIA, oversees a staff of seven. “I keep wondering when we're going to feel it.”
Others, too, are cautiously optimistic. It's business as usual for Boston architect Keith Moskow, AIA, a principal at the six-person office of Moskow Linn Architects. “Work was the slowest in the late 1990s, before the dot-com boom dropped off, and when the economy was slow in 1994, we were incredibly busy,” Moskow says. “It's entirely contrarian, and I have no idea why.” But he admits that being small, efficient, and diversified hasn't hurt. Seventy percent of his work is commercial and institutional, and Moskow has about 10 active projects. So when a couple of house commissions were halted on Martha's Vineyard recently, it wasn't the end of the world. However, he isn't tempting fate. A vacancy created by an employee who moved out of state will go unfilled for a while.
While no one argues that this downturn was a surprise, it's been swifter and deeper than most people expected. Those for whom the center holds have time to plan for contingencies. In Chicago's North Shore suburbs, the pace of leads has slowed slightly for Julie Hacker, AIA, and Stuart Cohen, FAIA. They oversee a six-person firm whose additions and new homes range from $250,000 to $4.5 million. If work falls off, they'll pay employees to work on the monograph they've been planning. The hourly, rather than salaried, pay structure offers some flexibility too. “Our people are working a ton of hours, so at some point they might be working less but still doing a 40-hour week,” Hacker theorizes. “I'm seeing that people with money will still build.”
catalysts for change It's true that serious architecture patrons are often untouched by national downturns. But for the first time, perhaps, what people are building is a response to broader economic pressures. Demand for green design is rising as people at all income levels try to spend smarter, and what's good for the planet is also good for business. A case in point is Aspen, Colo., a rarefied resort environment with its own boom and bust cycles. The real estate market there has flattened but not plummeted, and Harry Teague, AIA, principal of Harry Teague Architects in nearby Basalt, is seeing more of the area's billionaires remodeling their homes for energy efficiency. Last year his firm gained some credibility on that score when it built an office that generates more electricity than it uses. To fund it, Teague sold three apartments on the building's second floor for around $600,000 apiece, reserving a fourth rental unit for employees. “There's an encouraging sign of people modifying their homes to be more energy-efficient,” Teague says. “It wasn't visible before, but now they're thinking it will help sell the house.”
Sobering economic conditions have pushed both sustainability and affordability to the fore, and architects are riding that momentum. One example is San Diego, where home values have taken a beating due to the overheated condo market. “An advantage to the economy being down is that people are literally trying to save money,” says Jennifer Luce, AIA, principal of Luce et Studio, “and that correlates to green design and downsizing.” Two years ago she began experimenting with executing details at a lower cost. Rather than the usual $400 per square foot for renovations, she has mastered designs for half that price to meet a budget more people can afford. Modest, mid-20th-century tract house renovations are a growing part of her portfolio too. By leaving most of the structure intact, she gives clients more money to spend inside. These kinds of projects send a message that, even in a bleak economic period, they can do something transformative.
The story is similar in Phoenix, where homes are about 15 percent overpriced, estimates Peter M. Koliopoulos, AIA, principal of Scottsdale, Ariz.-based Circle West Architects. Though business has slowed for his 15-person firm, multifamily developers are asking for infill units that are practical and economical, yet memorable. They're spending money where it's most appreciated, because good design and planning got lost in the real estate rush. “The units don't need to be large in scale as much as well-designed,” Koliopoulos says, with amenities like patios, efficient kitchens, rooftop gardens, and a welcoming building lobby.
“Projects are getting smaller,” agrees E.J. Meade, AIA, principal of arch 11 in Boulder, Colo. “I don't know if it's a reaction to the economy or energy issues, but the time of the 7,000-square-foot house is coming to an end.” His eight-person practice is busier than ever, however, with everything from small additions and pricey energy-independent homes to a 26-home LEED-certified development in the Roaring Fork Valley of western Colorado, where oil and gas exploration is creating a boomlet. “Our strategy is somewhat omnivorous—there are very few projects we turn away,” he says. “But we've also gained a reputation for doing exceptional work—the secret in any bad economy.”