Healthy outlook for 2010

There's certainly a lot of information in ZweigWhite's recently released 2010 AEC Industry Outlook, so don't worry if you haven't gotten to the section in chapter 2 about the health care market yet. For those who are still digesting the 214-page report, I found this line penned by book editor Elaine Howley particularly interesting: "The rising cost of health care benefits that makes AEC firm leaders crazy when looking at their expenses is a main driver of growth in the sector and a potential source of funding to drive more work."

With so much change expected to come in 2010 through health care reform, you can expect this delicate relationship to become even more prominent in the year to come, and beyond. What is your firm doing to benefit from the changes to our health care system? Are you in the mix now for projects, or will you be left on the sidelines again, like you were when the American Recovery and Reinvestment Act of 2009 was signed into law 10 months ago?

Sustainability can be fun

Autodesk has found a way to bring sustainability awareness to the masses: it recently launched RETROFITS, an online game it hopes will broaden the appeal of green building issues, not only within the design community but to the world as a whole. Through a hybrid quiz show/animated adventure, players can learn more about why it's important to think about the environment when they decide to build a skyscraper, or throw their burger wrapper out the window, or replace the windows in their office buildings.

So, what's your high score? Did you learn anything by playing that will help your firm in 2010?

Looking back, moving forward

Whether it's a look back at the first nine years of the 21st century (I refuse to declare 2009 the end of the decade; after all, the first year was not the year 0, so the decade still has another year to go) or simply a reflection on the past 12 months, December brings about a lot of self-examination in all corners. It's tasks like these that can serve to strengthen your firm in the coming year, as long as you learn from mistakes in the past and continue to do the things that made you successful in the first place.

How much time does your firm spend reviewing what went right, what went wrong, and how to fix it next time so it never happens again?

No resting on their laurels

Only 18 months or so after finishing the longest sea bridge in the world, Chinese officials announced this week they're getting started on one that will shatter the new record. The 31-mile Y-shaped structure will connect mainland China with Macau and Hong Kong when it's completed in 2015. It's expected to feature an underwater tunnel with artificial islands and cost about $6.75 billion.

They say, "Everything's bigger in Texas," but I'm not sure how our friends in the Lone Star State could top this one.

So, is there a chance your firm could get some work out of this project? What do you think of the idea? Are there other places you think a bridge like this, or maybe an even longer one, could be built here in the U.S.?

Happy 102nd, Oscar!

About a month ago, we noted Brazilian architect Oscar Niemeyer was returning to work after a bout with gall stones and a cancerous tumor in his kidney. Earlier this week, Niemeyer celebrated his 102nd birthday, doing what he loves: working. He's unimpressed about reaching the ripe old age of 102, saying, "There's nothing to commemorate."

Have you seen any of Niemeyer's work in your travels? Has his work inspired you in any way to think differently about a project, especially given his love of domes, curves, and sweeping lines? Are you part of a firm that has someone in place whose tirelessness is similarly inspiring?

Bad news for ABI

After seeing its monthly Architectural Billings Index reach its highest level since August 2008 in October (46.1), the American Institute of Architects (AIA) this morning says the number slid to 42.8 for November, a trend AIA Chief Economist Kermit Baker called "cause for concern" in a telephone interview.

"It looked like it was headed for 50, but the November number is lower than the March number, so clearly the message is this is going to be as labored recovery," Baker says. Any number over 50 shows an increase in billings from the previous month.

New project inquiries were flat in November, at 58.5, but Baker hasn't seen those numbers translate into much new work, he says. Regional totals were largely unchanged, as were sector figures for residential, commercial/industrial, and institutional projects.

"Folks are looking a bit wider for projects, but ultimately only one firm is going to get the project," Baker told me this week, adding he expects it to be "well into 2010, maybe closer to mid-year, before we see a real recovery in design activity."

So, what's your take? Are you concerned by the latest ABI numbers? What's your thought on the project inquiries number staying well above 50 for several months now?

Focus on the basics

We're excited this morning to have our first of what we hope will be many contributions from Steven W. Smith, president and managing director of WSP-SELLS (Briarcliff Manor, NY), a 250-person transportation and infrastructure firm. The company is part of the WSP Group family, which ranked third in The Zweig Letter 2009 Hot Firm List. Inspired by one of his managers' requests to venture in to new areas, Smith looks at what firms can do to ride out the economic storm, even when it reaches historic depths:

"In a difficult economy, remember to focus on the basics. As we enter the second year of The “Great Recession,” I have been pleased that we have been fortunate enough to maintain our revenue and bottom line, but it has not been easy. As with most things in life, it all comes down to hard work and a little luck, such as coming in first rather than second on an important project. I believe the real trick to surviving in these times is by staying totally focused on what makes your firm tick.

"It is so tempting to try new avenues of business when some of your existing revenue streams are drying up. More often then not, these side ventures result in dead ends. Spending that effort on the existing areas of your business that are working well will, more often than not, provide a far better return on investment. If you think about it, when project opportunities are few and far between and competition is intense, our clients will protect the ones they know! While there are exceptions to every rule, when the choice is between investing in an area of your business you know well or taking a leap of faith to a new business area, I will always choose the known route, especially in times like these."

So, what's your firm's approach? Do you stick to the basics or do you try to chase whatever you can find?

On the fast track

If you thought the competition for the $787 billion available through the economic stimulus package, more formally known as the American Recovery and Reinvestment Act,  was fierce, you haven't seen anything yet. More than 40 states are vying for $8 billion in federal high-speed rail funds, with projects totaling about $60 billion. Once again, there will be a lot more work on the outside looking in.

Is your firm part of any of these proposals? What are you doing to latch on to one of these projects? Are you doing any lobbying in Washington to try to make sure your project is chosen?

Big Apple projects rotting

More than 500 projects are on hold in New York City, according to the New York Building Congress. The Building Congress said the city government should allow tax credits or zoning changes to help get stalled projects moving again. The city recently approved a law that lets owners submit construction-site safety plans that would keep their permits current for an extra four years, so stalled projects could be restarted more easily.

So, if nothing's happening in Las Vegas, and now things are slowing down in the Big Apple and in the Windy City, where are we to turn for some good news? Are you a victim of one of these stalled projects? How much is affecting your firm?

Cities desire streetcars

At least 45 U.S. cities are considering adding street car lines after the recent announcement by Transportation Secretary Ray LaHood that $130 million will soon be available to communities looking to build these mass-transit lines. The list includes Augusta, Georgia; Winston-Salem, N.C.; and Grand Rapids, Michigan. With grants as high as $25 million each, it could be quite a battle for a piece of the pie.

What do you think about this idea? Does your firm stand to benefit from the construction of these new rail lines? If so, would you prefer to see them go to the big cities or have the money more spread out among several dozen smaller projects?

Gingerbread houses get a makeover

The Chicago Tribune recently got some architects in the holiday spirit by asking them to come up with new versions of the classic gingerbread house. The edible creations will be auctioned off for charity. Good to see that, even in tough times, there's still time to remember what's really important.

So, which one is your favorite? Is your firm doing anything unique to celebrate the season?

Decade of decadence?

New materials and methods helped to produce an array of sci-fi structures across the world in the past 10 years, leading the architecture of the decade to serve as a representation of our penchant for excess, according to one overseas critic. The writer calls the BMW Museum in Munich, Germany, a "nightmarish" example of the need for attention and personal gratification.

So, what do you think? Was there an excess in self-promotion in architecture in the turn of the century? Will the economic downturn lead to a more conservative approach in the next decade or so?

Phoenix falling

The Associated General Contractors of America, facing the potential of another 430,000 job losses in 2010 in the wake of 20% unemployment through the end of this year, is encouraging federal lawmakers to pass new transportation spending measures. Officials hope that will ease some of the bloodletting, but it may be too late for former hotbed Phoenix, which lost more construction jobs from October 2008 through October 2009 than any other major U.S. market.

"There's almost no place to go but up," AGC Chief Economist Ken Simonson said, referring to the dire situation facing general contractors these days. So, while the national unemployment rate is down to 10%, things continue to look bleak on the construction arena and in commercial real estate.

In one glimmer of hope, it looks like about 400 workers will be needed to build the biggest wind farm in the U.S. in Oregon, after General Electric secured the $1.4-billion contract. Shepherd's Flat is expected to be able to power 235,000 California homes and will supply 10% of Southern California Edison's renewable energy.

So, how long do you think the downturn will last for the construction industry? How much worse will it get?

From Hot Firm to closed - but how?

In August, Cubellis was #13 on The Zweig Letter Hot Firm List. A little more than three months later, the 175-person Boston-based architecture and engineering firm was closing its doors, largely because Sovereign Bank froze its line of credit, according to President and CEO Lenord Cubellis.

So, do you expect to see more of this in 2010 - firms unable to stay open because banks are getting less lenient with letting them slide? Our founder, Mark Zweig, says that wouldn't have happened in the recent past but speculates it will happen more in the future. Do you agree? Have you seen this happen first-hand? Are you hoping your firm won't follow in Cubellis' footsteps? Do you learn anything from their misfortune?

The walls are closing in

There was an interesting piece in The Wall Street Journal yesterday on how office space is becoming a little cozier during these tough economic times. I'm sure you'll notice that most of the firms profiled in the story are from the AEC space, and some of them are big boys like Stantec and HOK, both of whom are always at or near the top of The Zweig Letter Hot Firm List.

So, what's your firm doing in this regard? Are you trimming the office space as a way to save money? How are you finding the negotiations when your lease expires or is up for renewal? Are prices more reasonable than in the past because any occupant is a good occupant in a landlord's mind?

Get inspired to be creative

I came across this collection of wacky roadside architecture today and saw it as my duty to share it with all of you. Sure, there's a time and a place for standard buildings and following the lead of historic edifices. But what seems to be lacking in this age of "get it done and move on to the next job" is a spark of creativity that could really set your project apart. Some people might hate it, others will love it, but EVERYONE will be talking about it, and enough people with deep pockets and land to go with it will notice and want to bring your firm aboard when it's time for their next building to go up. Sure, it takes a unique owner to open a donut shop shaped like a donut or a clam shack shaped like a take-out box, but it doesn't hurt to toss the idea out there and see what your client thinks.

Let's make a deal

I spent three days last week at ZweigWhite's 2009 Mergers & Acquisitions Summit, meeting some of the industry's top wheelers and dealers and hearing about some of their successes and even some of their failures, a rare treat for journalists-- and for potential first-time buyers or sellers, I'd imagine. We'll have plenty of coverage of the Summit in the December issue of AEC Finance News, but my overall impression of the event after attending for the second year in a row is there was much more conversation among those who were there than last year, when interaction was at a minimum in the early days of the economic meltdown. I'm not saying there will be more deals in the next 12 months than there were this year, but it was good to see more firm leaders thinking about buying rather than selling.

Mixed bag for construction industry

As we turn the calendar and enter the final month of 2009, it's still a bit unclear where the AEC industry is headed. On the one hand, highway construction projects that were on the fast track because of the $787 billion economic stimulus package are slowing, meaning more job cuts on the horizon for that segment. On the other hand, the U.S. Commerce Department says construction spending was up slighlty in October, with an increase in home building offsetting the continued decline on the non-residential side.

So, how do you read the tea leaves? What do you see on the horizon for the rest of this year and the end of the decade over the next 12 months or so? Will we close the first part of the new millennium on a high note or do we have a dreaded W curve on the way, with another dip still to come?