Billings Are Down, But Architects Are Planning Ahead Of The Pandemic

Omgivning founder and principal Karin Liljegren is keeping a positive mindset.

Liljegren founded her company during the last recession to help companies redesign their space. Ten years later, the coronavirus has sparked the start of another downturn, and much commercial real estate space has turned upside down.

She said she is aiming to help again.

"A recession is the perfect time to rethink about what you can do with your building. You may not take a big leap forward but you may need that early analysis," she said.

Last week, the American Institute of Architects released its Architecture Billings Index report, which surveys more than 750 architecture firms nationwide. 

It awards scores based on business being done, with anything below 50 indicating a decrease. March billings scored a 33.3. New project inquiries and design contracts scores dropped dramatically, posting scores of 23.8 and 27.1, respectively, according to the report.

As many of her current projects have stalled, Liljegren said she and her team at Omgivning have created design charrettes, or design workshop examples, as a way to generate more business.

Omgivning is not alone. As architecture firms brace for the financial ramifications of the coronavirus, many are creating new design concepts that include social distancing guidelines, design trends and other potential health protocols to prepare clients to navigate the coronavirus and post-coronavirus environment. 

"This is a natural disaster," RDC President and CEO Brad Williams said of the coronavirus. "This is survival of the fittest ... From our standpoint, what we're trying to do is position ourselves with our existing clients to tackle those [design] issues."

It is a trying time for architects. Month-to-month billings are down dramatically, many firms are reporting halted projects and very little new business is occurring at the moment, AIA Chief Economist Kermit Baker told Bisnow.

Generally, architectural workflow is a good leading indicator of broader economic trends in the economy, because many are involved in business investments in nonresidential commercial real estate projects early in the process, Baker said.

"Architecture firms saw a sharp steep downturn almost immediately in March and it has continued that way," Baker said, surmising that many projects fell off in the second half of March due to shelter-in-place mandates that were ordered earlier that month.

Baker said new signups for work and general inquiries for the month also fell. The good news: Many firms have reported a healthy backlog of current projects, about six months worth.

Still, the longer the pandemic continues the more the design business will drop.

"It's pretty clear April and May are going to be very bad months for design," Baker said. Keep in mind the billings index is a month-to-month comparison survey, he added.

"I would guess that we would see an abysmal score in April, way below 50," he said. "Will it be as low as 33? Hopefully not. That would be a steep decline on top of a steep decline."

ZGF partner James Woolum said his company has experienced some slowdown with a few clients putting projects on pause, but others in healthcare and tech continue to move forward.

"The general observation I can say is that while we have had some projects that have paused, we have other clients saying the work needs to continue," Woolum said. "That's due to the diversity of [ZGF's clients and] work and a little bit of luck. A lot of life right now is the luck of the draw."

Woolum said one of his company's client's is grappling internally with how to design the workplace of the future. One idea was to add higher partitions between people's desks to create social distancing, Woolum said. But when the company has previously rolled out a similar design, workers were against it.

"It's going to be really interesting to see if things that didn't use to fly will fly now," Woolum said. "It's going to be interesting to see how people are going to self-select what social distancing means to them."

Woolum said when it comes to designing offices in today's environment and post-coronavirus, it is not a complete reinvention.

"It's a complete rethink," he said. "Given the assets that I have, offices, conference rooms, how am I going to rethink those spaces in a creative way? I personally predict that the biggest shift will be in human behavior. It'll be less about what we build than how we use it." 

Perkins and Will Urban Design Practice Leader Martin Leitner said he and his company are looking into how to design for the home, mixed-use, multifamily and neighborhood of the future in this new environment. 

Home is not only the new office but with shelter-in-place orders, it is has also become the gym, movie theater and entertainment space, Leitner said. 

"It’s still early," Leitner said. "Everyone is evaluating and really hungry for ideas and precedent. What have we done in the past that can fit better today? It’s a very exciting space."

Williams, the RDC president, said it is a challenging time for architects. As someone who oversees three offices and about 140 employees, he said he is relieved that his company received a much coveted Paycheck Protection Program loan. He would not disclose how much the company received.

"This has given us some flexibility and breathing room to see how the economy is going to play out over the next few months," Williams said. "We've seen a little bit of drop-off ... but this has allowed us to keep our brain trusts in place and hunker down."

Williams said his company had a great year last year so it has a healthy backlog of work. When it comes to preparing clients, he said almost all the design trends that many architects were already preparing for have now come to the forefront.

Architects knew that with the growing demand for food and grocery pickup and delivery, that would be something they needed to address with retail clients, he said. Architects knew with the advancement of technology there would be more remote work and it would impact the home and office environment, he said.   

"This has just accelerated everything that we already knew was coming," Williams said. "Online grocery and food delivery was big before and that is even going to double now. For our office clients, we're trying to tackle the whole reopening process. We're trying to document where signs and barriers go and even where to get those things. We're helping them create some sort of guidelines and best practices."

Omgivning, too, received a PPP loan to keep about 40 employees afloat for the next few months. Liljegren said her company has a backlog of work. 

"Billings are down but we have a lot of projects that are in construction, more than normally," she said. "We understand that billings are in the toilet for a few months. The PPP and the CARES act with PTO time is significantly going to help us through."

For now, Liljegren said she is focused on promoting design charettes that address her design ideas on the multifamily, office and retail landscape. She also is continuing to foster her existing relationships with clients, and said she looks forward to speaking with potential clients about how her company can help them navigate the current environment.

"Like I did back [during the Great Recession], I am focused on how to help people figure out what they can do with their buildings," she said.