Building Nevada - May 2009

Architects

Designing Around Economic Turmoil

by Alexis K. Burke

Survival Tactics

    Today’s construction climate in Nevada is a reverse from what has been seen in the past.  Projects are fewer and farther between and every sector of commercial development has been affected in some way.  Even so, some of the state’s top architectural firms are thriving despite it all. Public works projects have become much more prevalent and a backlog of work has kept architects going when all else seems to be at a standstill.

    “I have not seen it this slow in 36 years,” said Gary Congdon, principal at Lee & Sakahara Architects in Las Vegas. “Business is down significantly, we have two years worth of projects on hold at this point. Projects that are fully entitled, with the planning done, are completely on hold.”

    Without fail the single largest contributor to the holding pattern mentality is the lack of available financing. The absolute illiquidity of the financing markets is the culprit holding up development. According to Congdon, a developer cannot get financing on a speculative development unless it is preleased 50 percent or more. “Now, 10 to 15 years ago, that kind of preleasing was the norm, but over time we got away from that, to the extend that a developer could get financing with no preleasing based on portfolio performance. The speed at which the financing landscape changed is what has taken the building trade by the throat.”

    Many firms are retooling their entire operating structure, revenue streams and business model; while other firms are merely trimming their expenses and hunkering down in order to ride the economy out. “Historically, we maintained a 50/50 balance of public and private work, but now that ratio is more like 80/20,” said Christopher Larsen, managing partner with Dekker Perich Sabatini in Las Vegas. “We are very fortunate that we maintained a good balance of public and private work, because we are seeing a lot of private sector only firms struggling to transition to public works.”

    Congdon echo’s Larsen’s comments when he explained that, “A firm could get hurt badly in a financial sense if they have never done a public contract before and don’t do their research before submitting a bid.”

The Ugly War

    How fierce is the competition? “It’s getting very ugly,” said Larsen. “There are firms sending out mass emails to brokers offering free space planning and work up front on tenant improvements for free with no guarantee of a contract. You just can’t compete with that.” The price war is traditionally one of the most brutal fights in recessions and this instance is no exception.  The firms interviewed all said they have, of course, adjusted their prices to reflect the economic conditions, but that they simply won’t engage in severe fee reductions.

    “When you see bids coming in with fees that are 50 percent of what they should be, you ask yourself how can they do the work properly and put together a good set of drawings. The honest answer is you can’t,” said Congdon.

    The price undercutting that is typical in commodities spells out an entirely different scenario when it pertains to professional services such as building design. It leaves some to wonder whether or not there might be projects being designed that have inferior quality and documentation.

Employment Woes No Longer

    Three to five years ago architectural firms in the Las Vegas Valley couldn’t find enough available talent. Today, what a different landscape it is. “I must get a resume across my desk every other day,” said Congdon. “There are a lot of experienced, well-qualified architects out of work right now, much more than the unemployment statistics let on.”

    Pete Blakely, president of Reno-based BJG Architects seconds Congdon’s thoughts when he stated, “It is really frustrating, because for years we were unable to get good people and now suddenly there are some good people out there looking for work, but you just don’t know what you would do with them if you did hire them. Right now, we would make some strategic hires if and only if the right person walked through the door.”

    The other employment challenge this industry is facing, as are many others, is the expertise loss which is exiting with retiring Baby Boomers. Most of the professionals consulted for this article shared the same thoughts on these circumstances; that yes, a loss of talent will be felt, but that architecture is a changing industry, where the youth have an undeniable advantage in their technological astuteness. Additonally, the industry is still considered glamorous enough to draw ample students into university programs across the country.

Training Future Architects

    The University of Nevada Las Vegas founded its School of Architecture (SOA) in October 1997 and remains the only program accredited for architecture in the state. In the fall of 2008 the Downtown Design Center opened in a renovated primary school in Las Vegas. The center hosts specialized studios, the Klia Juba lecture series, and is home to the state and local chapters of the American Institute of Architects.

    “The SOA is great, it is a significant resource for the community,” said Steven Carpenter, owner of Las Vegas-based Carpenter Sellers Architects. “There are so many important things such as idea generation that happen in the school environment that don’t and cannot happen in the professional community. This town benefited greatly by having that school open up.”

    That enthusiasm is not shared by all architects, in fact, there is a very          tangible sentiment in the architecture community that the SOA has a long way to go before it earns their respect. “They need some strong leadership,” said Larsen. “I know they are looking for a new director right now. Also, the programs need some balance, right now there is too much theory and design. They need to get students out on construction sites for real world experiences.”

Public Works Projects

    With the private sector at a standstill, the only signs of life are in the form of public works projects, and that means that everyone is going after the same work in a bid to keep the doors open.

    “Public works truly is the lifeline right now,” said Blakely. “There are so many firms pursuing any given public works project, it’s tough to differentiate yourself. We used to have a 30 to 40 percent hit ratio (ratio of jobs awarded to jobs pursued) and now I would say it’s a 5 to 10 percent hit ratio. Instead of five or six firms submitting, projects are seeing 30 to 40 firms submitting.”

    As the government continues to build, while the rest of us sit firmly on the sidelines, a long standing battle comes to the forefront; the awarding of state public works projects to out-of-state firms.

    “I find it very troubling that taxpayer-funded projects are being awarded to firms outside of Nevada,” stated Larsen. “The private sector has every right to bring in ‘starchitects’ for their projects, but I see no reason for it on the public side. We’ve been told that local firms just don’t have the expertise – frankly, I don’t agree with that.”

    Congdon feels the same way as Larsen, but goes even further when he chides owners for overlooking the massive talent right here in the Valley. “I’ve always been proud of what my fellow architects have done,” said Congdon. “It used to aggravate me to no end that developers went outside of the city. We have good quality firms who know the local environment.”

Recovery, Architect Style

    The recent stimulus package, the American Recovery and Reinvestment Act, is intended to provide funding for public works projects throughout the state. At this point, the funds have been received and the Legislature is in the process of appropriating the monies to different projects. The most pressing concern arising out of the architectural community is the need for pencil-ready projects.

    “Traditionally, shovel-ready projects, those in the construction phases, are what get the most appropriations,” said Congdon. “But once the work is completed on those in a year or so, there will be a lull in construction work because there was no funding for projects in the design phases.”

    The challenge becomes creating awareness for this issue. Blakely states that, “Shovel-ready projects are of no use to architects, but politically architects that earn pretty decent livings aren’t going to get any sympathy nor do we have the lobbying power to get our voices heard. Honestly though, anyone who thinks the government can act quickly enough to produce work for our industry is just kidding themselves.”

    For many of the state’s architectural firms, economic recovery cannot come soon enough and it is their belief that for a turnaround to occur, all it would take is one or two projects to come back online. The point that cannot be stressed enough about the eventual turnaround is this: it still takes almost the same amount of time for architects to get their work done. From the beginning of the project to doors opening, that timeline is around two years and if owners and developers want to be operational in 2010, now is the time to get started.