Slide 1
What Does The Impending Downturn Mean for Key Trends in the A/E/C/ Professions?
Kermit Baker, Chief Economist The American Institute of Architects
Green Building Products Summit
October 30, 2008
Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials
Larger Firms Account for Large Share of Activity and Growth in Architectural Profession
share of total staff and billings in the profession in 2005 at all firms by firm size
Firm size (#emp.)
Share of
Firms
Share of
Staff
Share of
Billings
1
23%
2%
2%
2 to 4
38%
11%
6%
5 to 9
19%
12%
8%
10 to 19
11%
14%
12%
20 to 49
6%
19%
20%
50 to 99
2%
15%
18%
100 or more
2%
27%
34%
Source: The American Institute of Architects –
The Business of Architecture, 2006.
Opportunities to Open New Markets Top Reason for Recent M&A Activity
Most important reason for recent interest
in merger and acquisition activity, % of firms
AIA Work-on-the-Boards, July 2007
Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials
Managing Peak Workloads Principal Reason for Outsourcing Work Offshore
Most important reason for outsourcing work for those firms that have ever outsourced work on domestic projects offshore, % of firms
AIA Work-on-the-Boards, October 2007
Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials
Slide 8
Almost All Firms Work On “Green” Projects; But Share of Projects That are Green Much Lower
Share of firms; share of projects
Source: AIA Work-on-the Boards Survey; April, 2008
Lifecycle Cost Savings Seen as Key Motivation for Sustainable Construction
% of respondents ranking as greatest motivation by businesses
Source: AIA Work-on-the-Boards Survey, May 2007
Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials
BIM Has Had Strong Levels of Adoption, But Many Have No Plans to Implement
Firm’s use of virtual design/ building information modeling, % of firms
Source: AIA Work-on-the-Boards Survey, February 2008
Most Firms Believe BIM Will Become the Industry Standard, Although Timetable Varies
When will BIM become the industry standard, % of firms
Source: AIA Work-on-the-Boards Survey, February 2008
Higher Quality Designs Perceived as Greatest Benefit to Firm of Using BIM
% of respondents ranking as greatest benefit
Source: AIA Work-on-the-Boards Survey, February 2007
Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials
Nonresidential Construction Materials Costs Have Increased Twice as Fast as Overall Inflation in Recent Years
Sep. 2008
Source: BLS (CPI, PPI); compiled by AGC Economics Dept.
Outlook for Design Firms and the Construction Industry
• International credit markets in most serious condition since the 1930’s.
• U.S. economy likely in recession; most international economies also weakening.
• Residential market still spiraling downward; nonresidential construction activity just beginning its downslide.
• U.S. businesses in construction industry facing more competition (domestic and international), pressure for diversification, unique qualifications, greater efficiencies, and other competitive advantages.
Moving Beyond the Downturn: Prospects for Key Trends In the A/E/C Professions
• Industry concentration, consolidation, and integration
• Globalization: outsourcing and international opportunities
• Demand for sustainable design
• Technological investments to increase productivity and promote coordination (e.g. BIM)
• Rising costs of construction materials