Building resilience during economic uncertainty
Firms that are growing despite tough business conditions share what is working for them.
Though the U.S. economy is technically growing, according to the latest numbers from the Bureau of Economic Analysis, the sentiment in architecture is mixed. While some markets and regions are bustling, overall firm billings are lackluster. The AIA/Deltek Architecture Billings Index® has remained mostly in negative territory since October 2022.
Several forces at play have continued the sense of stagnation, says Evelyn Lee, FAIA, founder of Practice of Architecture and a past AIA president: “We have an administration that is seemingly playing with the supply chain. … We have AI moving in and creating more new work in specific areas for firms but also getting pushback from local jurisdictions.”
Carol Rickard-Brideau, AIA, CEO of Little Diversified Architectural Consulting, adds that the Federal Reserve’s ongoing tweaks to the benchmark interest rate create uncertainty in the speculative development market. Consequently, architects may feel stuck. They have work on their plate but worry how long they can endure the interminable slog.
The good news is that the profession has shown it can weather economic downturns, with past examples including those caused by COVID-19, the Great Recession, and the dot-com bubble, to name a few. Several firms that continue to grow during the current downturn share their strategies below.
Diversify with intention
Diversification across markets and geographies will help minimize your firm’s risk exposure, but it typically requires considered preparation to build salable expertise. SMRT Architects & Engineers, a firm of approximately 140 people, is organized around seven market sectors in which its leadership team has conscientiously developed expertise over years, says Graham Vickers, AIA, senior principal and principal-in-charge of marketing at the firm.
SMRT’s diversification has proven prudent in the face of different procurement timelines across markets, Vickers says. A project win in advanced manufacturing may move to staffing two weeks later, while civic projects can take nine months to kick off. “If, nine months later, the private industry is not popping off anymore, we’re still getting ... that previous work,” Vickers explains.
As an architecture and engineering firm, SMRT has work incoming from both disciplines. Firm leaders also track emerging submarkets for growth opportunities. They had an early presence in radiopharmaceutical manufacturing, which requires facilities equipped to produce and process radioactive medical drugs for diagnosing and treating diseases like cancer. “We got in with startups and, like everything else, they get acquired, and the projects get bigger,” Vickers says.
SMRT saw a burgeoning need for sustainable and affordable housing solutions as well. In September, it announced its acquisition of Petersen Engineering, instantly adding expertise in Passive House and multifamily housing design to its portfolio. “We don’t expect [activity in this market] to boom tomorrow,” Vickers says, but more likely after “one or two political cycles. ... It is a need, and that’s where it starts.”
WRNS Studio, a growing firm of 150-plus employees, is also entering a new market. A returning developer client brought WRNS to the table for an innovative student-housing collaboration between Cabrillo College and the University of California, Santa Cruz. The former, a community college, had buildable land but no experience with delivering campus housing, while UCSC had the opposite attributes, says WRNS partner Lilian Asperin, AIA: “We found ourselves in that beautiful opportunity of being in the mix.”
WRNS stays close to clients’ past project completions, studying post-occupancy conditions and staying alert to future needs and opportunities, Asperin says. For example, WRNS helped Princeton University host and organize a Society for College and University Planning symposium at the institution’s new Frist Health Center to share the project’s story. As with any busy client, Princeton stakeholders had moved on to other initiatives, Asperin says. “But for us to say, ‘We’ll carry that load and help you spread the love,’ they appreciated that.”
Lee recommends asking studio team members for ideas and interests that they may want to bring into the business. A firm known for its high-end residential portfolio discovered one of its emerging professionals was adept in carpentry, Lee recalls. That skillset could lead to custom commissions and increased opportunities for client engagement, all while elevating the designer’s career.
Welcome all projects, big and small
In Seattle, Stemper Architecture Collaborative has never had a layoff or a pay cut in its 35-year history, says president and managing member Melody Leung. “My business partner and I are willing to make personal sacrifices to not have [either] happen.” But the 12-person-plus firm also stays busy with a mix of projects in the public sector, infrastructure, building science, vertical transportation, and on-call contracts.
Every institution and public agency endures budget and funding swings, and Stemper AC is prepared to serve them even when project scopes are small, Leung says. “Loyalty matters to them.”
As part of Stemper AC’s on-call work, a city department may approach the office with a construction budget of $100,000 or a total project budget of $250,000, Leung describes as an example, adding: “That’s usually pretty low these days for being able to accomplish anything.” However, Stemper AC will spend time analyzing how far that budget can realistically go and recommend how the client can right-size the project scope or phase a project until additional funding is available.
“We work hard with them to say, ‘Here’s what we can do with this amount of money, and this is what you’ll probably need in order to accomplish this project,’” Leung says. “And that’s important to the client in the long term. They’d rather see that an architecture firm is willing to do a tiny job, which could lead to a larger job. It’s a matter of building that relationship.”
Expanding the pipeline
Pre-positioning has been top of mind for several years at Little, a 450-person firm with six locations. “The first time [you meet a prospective client] shouldn’t be when you get the RFP or at the walkthrough of the project itself,” Rickard-Brideau says.
Firm leaders and staff members interested in business development are encouraged to proactively research challenges and priorities of potential clients. Prior to industry events and conferences, Little will review attendance lists for existing contacts and prospective leads, host events, and invite prospects for a coffee or meal. The firm also stays close to past clients to relay industry news and market innovations.
“We’ll create a series of educational seminars about WELL, something within their industry that we’re seeing on the financing side, or anything that might be helpful for them,” Rickard-Brideau says. “We’re trying to remain a trusted partner where they know we’re looking out for them.”
By keeping conversations ongoing, Little might catch wind of a client pain point, or what the firm calls a “splinter,” and identify opportunities to help them remove the splinter.
For firms with multiple leaders, Lee recommends having a principal not in charge of an active project take a client out to lunch at a specific milestone or prior to closeout. The client may feel more comfortable sharing highlights and improvement areas with the less vested principal; at the same time, the firm can showcase a different leadership voice or area of expertise. “Through inquiry, they can learn other places where the firm could be supporting [the client],” Lee says.
Though many design firms are staying busy amid current economic conditions, nothing is to be taken for granted. “Certainly, this volatility could escalate at any time,” Vickers says. “But maintaining that … legacy of diverse market sectors led by strong thought leaders is our business approach, and it’s serving us well.”
Wanda Lau is a freelance writer covering architecture and design and a former editor of ARCHITECT magazine. She lives outside Chicago.