If you know any architects, you may want to check in with them because chances are they’re exhausted from having more work now than ever before, with no end in sight. That’s because despite all the headwinds facing real estate design — namely supply chain disruptions and staffing woes — developers are in growth mode, and architects are needed as they are uniquely equipped to game plan for what users want and need.
The volume of work has not only accelerated for architects but they’re also tasked with mapping out new requirements while maximizing flexibility, which is time-consuming and labor-intensive. The workload is getting so substantial that demand is exceeding the supply of architects in some instances.
“The backlog is so significant that we are having to contemplate turning away work, which drives us crazy,” says Steve Goggans, principal and architect at SGA | NW, a GF design company. “We are trying to be most responsive to repeat clients, but we may find ourselves unable to produce and perform if we continue to take on work, so we are having to be a little more judicious than we ever have before.”
Goggans says that SGA | NW’s logjam is also caused by being specialists in multifamily design in the Carolinas, which is a hot property type in a growing region. Travis Vickers, CEO of Atlanta-based Vickers Design Group, says his firm doesn’t handle multifamily projects at the moment but still finds itself with a full backlog.
“Everyone who I’ve had conversations with is constantly blown away by the sheer amount of work that everyone has,” says Vickers. “Everyone who I talk to has more work than they’ve ever had before.”
The workloads from Vickers Design and SGA | NW match the findings from the Architecture Billings Index (ABI), a monthly economic indicator for nonresidential construction activity that represents a lead time of nine to 12 months prior to construction starting. The ABI has measured above 50 every month between January 2021 and January 2022, according to the index’s originator, The American Institute of Architects (AIA). (An ABI score above 50 indicates an increase in billings. The ABI is calculated from AIA member firms surveyed monthly.)
The AIA has found that the uptick in billings is incredibly pronounced in the South, a region that the Washington, D.C.-based organization defines as comprising the Southeast and Texas. Among firms in the South region, the ABI was a robust 61.2 in January 2022.
“Beginning in late 2020 and throughout 2021, it’s been an incredibly strong recovery,” says Colin O’Brien, co-managing principal for Gensler’s Southeast region. He adds the amount of business that Gensler is conducting is “well ahead” of pre-pandemic levels.
Kyle Reis, president and CEO of Atlanta-based Cooper Carry, says that the large volume is due in part to the disruption caused from the early months of the COVID-19 pandemic in 2020 when firms like his had to pause or delay its hospitality, office and restaurant design opportunities.
“We have experienced renewed growth in 2021 and are optimistic about 2022 being on par with some of our strongest pre-COVID years,” says Reis about Cooper Carry’s pipeline.
New-look offices, eateries
Across all categories of commercial real estate, there has been a strong push since the outbreak to have physical spaces be as hygienic as possible. Goggans says that technology and protocols once reserved for hospitals and medical offices have now been “commercialized.”
“Interior design is where you see a post-COVID approach for items such as surfaces, finishes and some new technologies with decontamination using UV lights,” says Goggans. “That has moved out of the healthcare arena and is now more mainstream.”
“Wellness in the workplace — green spaces and better air quality — was a huge trend prior to the pandemic, and this has been something critical to our clients as they bring people back,” adds O’Brien.
The U.S. workforce’s return to physical offices has had many stops and starts as the country has dealt with the waves of the various COVID-19 variants, namely Delta and Omicron. The result has been uneven office utilization over the past two years as office-using firms have found that their employees can work from home full-time productively.
Kastle Systems, a security systems firm based in Falls Church, Virginia, is the proprietor of the “Kastle Back to Work Barometer.” The weekly metric is a measurement of the real-time utilization of office spaces that the company tracks using keycard, fob and KastlePresence app access data. Kastle secures and monitors 2,600 buildings across 47 states, and the weekly barometer is whittled down to the company’s 10 top U.S. office markets.
The 10-city average utilization rate for the week ending Feb. 16 was 36.4 percent, a 4.7 percent increase from the previous week’s 31.6 percent rate. Austin and Dallas-Fort Worth both saw jumps exceeding 16 percent from the previous week as those markets are seeing about half of their workforce come to the office.
With so much waxing and waning in the U.S. office sector, O’Brien of Gensler says that designing flexible office space has been critical for employers to house, protect and retain their staffers.
“The pandemic created the opportunity for our clients to think critically about why people come to the office and maximize the benefit of being there,” says O’Brien. “Hybridization of work environments — creating spaces that can support a wide range of activity and support both in-office and remote workers — has been big. That flexibility of space creates opportunity for occupants as they aren’t locked into a single use.”
Gensler has plenty of experience with new-look offices as the company recently designed headquarters spaces for Marriott International in Maryland, AmerisourceBergen in Pennsylvania and Morning Consult in Washington, D.C. Corporations such as these or tech heavyweights like Google and Facebook are building flexibility into their offices as they’ve embraced a hybrid work culture.
Reis says that Cooper Carry knows firsthand about designing these workspaces as the firm has recently designed urban projects with a high density of offices, including Carson South End in Charlotte, Broadwest in Nashville and Midtown Union in Atlanta. The firm also oversaw the design of its own headquarters in Atlanta.
“We took the opportunity to redesign our offices in 2021 to upgrade our technology, add more flexible collaboration spaces and retool for a hybrid working environment,” says Reis. “We are working with many of our clients to redesign and think about the purpose and nature of workplaces in a post-COVID world.”
Restaurants are seeing paradigm shifts in their design as well now that consumer preferences for mobile ordering, drive-thrus and to-go ordering have taken root. Keith Johnston, president of Atlanta-based GF, says that his firm has experienced a major shift in design requests from its restaurant clients.
“Traditional restaurants are starting to look at pickup windows on the exterior facade of their buildings and seeing if they can also get permanent outdoor dining,” says Johnston.
Prices: a moving target
A constant headache for the architectural industry the past couple years is the fluctuations in costs for construction materials, which complicate a project and make the finished product much more expensive than developers are willing to spend.
The producer price index (PPI) is a monthly data set from the U.S. Bureau of Labor Statistics (BLS) that tracks the price movements charged by producers for various commodities, including construction materials such as lumber and paint.
The PPI for construction materials rose 34.1 percent from January 2021 to January 2022. The PPI for lumber and wood products increased by 22.7 percent in that same time frame after peaking in May 2021, and the PPI for paint and coating items jumped by 26.2 percent year-over-year in January.
“Building costs on average were up 15 to 25 percent depending on which index you read from last year, so it’s proven challenging,” says Goggans. “What we are going to see is not so much a decline in demand. Projects are not going to pencil out as easily as they have in the last several years.”
Intertwined with the price hikes for construction materials is the delay of getting said materials from producers due to supply chain disruptions stemming from the pandemic.
“The supply chain knows no boundaries,” says Vickers. “Developers still want to deliver their project on what, in their mind, was the normal timeline. So how do we do that without the cost escalating? That is the challenge every day. Decisions have to be made way further in advance than they ever have before in order to meet schedules.”
To keep projects moving and costs suppressed, architects are getting creative during the design phase by looking at alternative materials. Vickers says his firm has a project in the works using structural steel components. The design was originally intended to use steel joists, but suppliers are quoting lead times to get those materials for August at the earliest.
O’Brien says that Gensler is working with its clients early on to mitigate any risk and weigh all options.
“It has created more flexibility in looking at alternative materials, and those include materials that have the potential to be more resilient,” says O’Brien.
Vickers says this approach of designing based on availability of construction materials is a reversal. Historically, the design dictated the materials used, not the other way around.
“It’s a much different way to start a project,” says Vickers. “What you thought it was going to look like and costs change based on how fast you can get it.”
Architecture firms added 12,100 payroll positions in 2021, according to the BLS. This almost exactly offset the 12,700 positions lost in 2020. In fourth-quarter 2021, architecture firms added 4,500 new positions, which is a pace that would net 18,000 on an annual basis.
The AIA is reporting that most of its responding firms are increasing compensation levels to both attract new talent and retain existing staff. The association forecasts wages for architectural positions to increase by 5 percent on average from 2021 to 2022.
“Any professional services firm is only as good as the talent it has, so creating rewarding, fulfilling professional experiences is a top priority for Gensler,” says O’Brien.
Vickers says that the labor pool is a major issue for all project team members like general contractors and engineers, and Johnston of GF says that firms must be proactive in addressing staffing concerns if they want to succeed long-term.
“Staffing by far is our biggest challenge across the board,” says Johnston. “It is one of our biggest growth obstacles, simply finding the labor.”
Firms are thinking outside the box in order to strengthen their position for having an adequate number of employees. GF recently closed on the merger with SGA | NW, an architectural firm with offices throughout the Carolinas.
Goggans says that the move allows his firm to both scale and have a clear succession plan once he steps aside, and Johnston says that the acquisition allowed GW to diversify its geographic footprint and expand its property type specialties, namely multifamily and civic work.
“There was a lot of good synergy, both at the leadership level and at the staffing level,” says Johnston. “GF pursued SGA | NW over the past couple months, and we finally closed this deal in January of this year.”
Vickers says being a modern architect is like being in an episode of “The Twilight Zone” as his firm’s workload has increased while prices are rising, all with fewer people and available materials.
“None of it makes sense on paper,” says Vickers. “Most design and construction groups are lacking people, so you have a supply chain challenge — from people all the way down to the chairs that you need for them to sit in.”
— John Nelson
This article originally appeared in the March 2022 issue of Southeast Real Estate Business magazine.