Building Nevada - May 2011

Architects

Waiting for the Bounce

by Adam Candee

The steep fall from boom days appears to have reached its nadir for Nevada’s architects, but they are not yet finding a bounce up from the bottom.

The barren landscape painted by a state economy no longer in freefall yet still far from recovery forces architects into unforeseen roles: marketers, networkers and even nomads. They battle fiercely for the few projects that exist, look as far as China for opportunities and spend years chasing jobs that used to be completed in weeks – a stark contrast to just a few years ago, when architects booked months in advance and even turned away work. The lucky ones who acquire projects must staff them after roundly cutting more than half their workforce in the past few years in response to the recession.

“It’s brutal,” said Jeff Frame, Owner of Frame Architecture in Reno. “That’s about as publishing-friendly as I can make it. It’s brutal. You spend more time chasing potential projects than you do working on them.”

Still, reasons for optimism peek through, if only in the form of discussion about potential projects that just did not happen during the worst of the downturn.

“We’ve seen more opportunities in the last three or four months, but they’re smaller opportunities,” said Chris Larsen, Managing Partner for the Las Vegas office of Dekker/Perich/Sabatini. “There’s more talk of projects, but they seem to take longer to get going. It’s about being thankful for anything we can get.”

Some simply feel that what isn’t getting worse represents a victory in itself.

“Everyone seems to be steady, for good or for bad,” said Sean Coulter, President of the Nevada chapter of the American Institute of Architects (AIA) and Principal of Pugsley Simpson Coulter (PSC). “There’s some stability in the market with the firms that are still here.”

Statistics from the website of AIA’s Nevada chapter indicate membership of 401 firms, with 292 in Southern Nevada and 109 in Northern Nevada. Coulter estimated between 60 and 70 percent unemployment among Nevada’s architects in the past couple of years.

What’s left to chase for whoever remains falls into two categories: larger tax-funded, public works projects and smaller private ones like tenant improvements, remodeling work, custom homes and studies or reports.

“It’s a little bit of a mixed bag,” said Don Clark, owner of Cathexes in Reno. “There’s not one particular kind of project.”

Big firms that can handle the scope of larger projects still hold the advantage in pursuing public work, but as they seek work beyond the former comfort of home, even large companies seek out smaller local partners. This is especially true for more specialized projects.

Talk of partnerships hints at a touchy subject in the architectural community: should local firms have an advantage when going for local or regional work? While the Nevada Legislature debates bills that would require more publicly funded work to be dedicated to Nevada-based businesses, the reality remains that there must be money to start a project before anyone can work on it. For now, architects must go where the work is.

Coulter said PSC looks for local outfits with which to partner when it chases projects outside Nevada.

“We don’t want to go in and try to work on our own,” Coulter said. “We wouldn’t want people coming into our town and taking work from us.”

Some of these relationships were built over years or decades, but many are more opportunistic. Firms coming together for specific projects acknowledge that combining qualifications, expertise and manpower provides a better chance to win the contract. The flipside is that architects know from the start that they will take less money for a job.

For Frame, who laid-off four employees in the past two years and now operates largely on his own, teaming up often still provides his best shot at a paycheck. He just paired up with a firm from Sacramento to pursue a project in Winnemucca. The firm planned to pass on the job before Frame got in touch and offered to partner.

“I go into it full well knowing I don’t get [the job] without them,” Frame said.

Frame makes a fine case study in the effects of the state economy on architects. As the growth industry plummeted, architects slashed staff and other expenses in bids to stay afloat. Some succeeded in doing so while many others moved away or folded. Frame’s laid-off workers left the state: one for Oregon, one for Texas and two for parts unknown. No longer does a receptionist await clients – they get the man whose name is on the sign.

In fact, the ability to deal directly with him on a regular basis has become one of Frame’s marketing points as he competes for even the smallest of jobs with larger firms from Northern Nevada and well beyond.

“I’m not the big firm, but when you hire Frame Architecture, you get Jeff Frame,” Frame said.

The new reality for architects is this: your portfolio alone is not enough. While relationships have always been important in securing and retaining clients, separating yourself from the competition on something other than price and track record is essential today.

“If it comes down to us or someone else and they’re a few cents cheaper, it becomes a relationship thing,” Larsen said.

An established firm with recognized players like Larsen’s Dekker/Perich/Sabatini is positioned to scrape by in that environment and did so last year, acquiring government projects through the National Forest Service and at Creech Air Force Base in Indian Springs. Yet his firm corrected course – or “right-sized”, as Larsen put it – from 28 employees in 2007 down to five now, while cutting some benefits for remaining employees and moving into smaller offices.

“We are cold-calling, trying to make new relationships and just meeting people,” Larsen said.

For architects who could barely crank out drawings as fast as clients requested them just a couple of years ago, the adjustment to recruiting new business as lifeblood can be challenging.

“This wasn’t covered in the professional practices class,” Frame said.

He secured one large project in 2010: a 20,000-square-foot medical/office building for the Carson Medical Corporation in Carson City, focusing on obstetrics and pediatrics. Frame said he would need three or four projects of its size in order to consider bringing employees back on full-time, though.

Coulter’s firm slashed from 50 full-time employees down to 16, but notably kept one particular employee: a marketing specialist. While that position converted from full-time to part-time, Coulter pointed to the fierce competition for projects as a reason for keeping someone to focus on marketing while letting go of architects.

“We’re spending more marketing dollars than we did even when we were busy,” Coulter said. “When we were busy, we didn’t need to spend money because projects kept rolling in. “

PSC spends about 10 percent of its total budget on marketing today, as opposed to roughly 5 percent in the past few years. That’s not just for jobs in Nevada. While Coulter noted competitors in the local market reaching out as far as China for potential work, his firm searches outside state borders for work simply because it must.

“Basically, any other market is better than Vegas right now,” Coulter said.

In fact, buildings coming down make as much news as ones that go up. Just north of the 215 Beltway on Stephanie Street, a 20,000-square-foot building designed by PSC sat empty in the middle of an enormous desert lot for the past five years. It was to be the sales center and clubhouse for Stephanie Village, a mixed-use community situated on the edge of Green Valley Ranch. The project never happened.

In early March, though, came what qualifies as a sign of progress in today’s Nevada economy: construction crews began tearing down the building. A grocery store chain purchased close to 25 acres of land for $3 million – an obscenely low price when compared to the $1-million-an-acre salad days of Southern Nevada – and took a first step toward making it usable.

The projects that do come about move at a glacial pace. Architects grew accustomed to moving from job to job in weeks or months, moving from an initial discussion to a groundbreaking with relatively few interruptions. No more. Caution reigns among prospective clients, especially those struggling to piece together funding from multiple sources to get started.

“We’ll meet [with a particular prospect] once a month, then we don’t hear from them for two or three months, new players come in and ask you to explain it to them, people drop in and out,” Frame said. “You spend a lot of time doing that.”

Like Frame, Clark is now years into trying to secure some jobs.

“Things tend to have a certain flow to them, that whole evolution of a relationship with a client,” Clark said. ”It really slowed way down pretty fast. [What was] a two-to-four month process – a handful of projects, we’ve been talking to people for two years. That lag in action is pretty different.”

The velocity of projects in 2007 felt artificial to many in the industry, though sustaining it as long as possible clearly made business sense. Even so, plans for eventualities can only extend so far.

“I tried to make sure I had resources to ride it out for a couple of years,” Clark said. “Well, we’re four years into it.”

A typical year for Clark would include about 35 started projects. Last year, that number fell to 12, “and half of those were not worth giving a job number to.”

“People talked about ’09 being a bad year,” Clark said. “Last year was worse for us.”

Clients drive harder financial bargains with architects, who in turn must be austere in their budgets. They also demand higher quality work, something that architects are happy to have the time to provide.

“You have to build a better box,” Frame said. “Gone are the days when you can put up four wood-framed walls and your own special stucco sauce.”

Awareness of sustainable design is growing as well, in large part because of cost savings. Clients might not want to pay for full LEED certification, but they do want the benefits such design brings.

“There’s sustainability and then there’s LEED,” Coulter said. “I feel that now, clients demand energy-efficient, sustainable projects more than before the economy tanked, if for nothing else than to save them money in the life cycle cost of the building.”

Clark said, though, that sustainability hasn’t translated directly into money for architects.

“The direct effect hasn’t been terribly evident,” Clark said. “We were doing sustainable projects way before it was cool. People say green and sustainability, but they don’t really know what that means. In the last throes of the devastation that’s been going on, the resistance has been going away a little more.”

While the slog of the past few years challenges architects daily, many profess optimism for the future.

“A lot of people I talk to are trying to be more positive because we’re tired of being negative,” Larsen said.

“I’m just not ready to stop being an architect,” Frame said. “It’s what I love. I’m not ready to stop.”

In fact, some see great opportunity to slow down and do things right, if for no other reason than they have the time to do so.

“It goes back to sustainability,” Coulter said. “When it’s not rushed, we can take time and design buildings properly, where the design ties into the community. We can take a really close look at how the city develops in terms of education and transportation. We really need to figure out what the city wants to be and have a long-range plan in place that maintains that focus.”