Demand for Architects Builds Momentum

The Wall Street Journal

By Robbie Whelan

Legat Architects

Chicago’s Legat Architects received a commission for an Oakton Community College center in Des Plaines, Ill.

There are few professionals more hopeful for a bright future this holiday season than architects, who are finally starting to see business conditions improve.

Billings at architecture firms have been depressed for the past four years, another victim of the real-estate and housing downturn. But in recent months, that has started to change.

The Architecture Billings Index, which is scheduled for release Wednesday, rose to 53.2 in November. That is the fourth consecutive monthly gain, up two points from a year ago and the highest reading since November 2007, according to the American Institute for Architects, which compiles the index. A reading above 50 indicates that billings are increasing.

A rise in architecture billings can have broad economic repercussions. The pickup means firms will need to hire new design teams, helping to reverse the slide in working architects, whose numbers declined to 153,000 in 2011 from 214,000 in 2007. Rising billings also are viewed as a gauge of future construction activity because real-estate developers tend to break ground on new projects nine to 12 months after they hire design firms. Construction generates large numbers of jobs for engineers, contractors and tradesmen.

Neil M. Denari ArchitectsArchitect Neil Denari got a commission this year to design 9000 Wilshire, above rendering, in Beverly Hills, Calif.

Kermit Baker, the AIA’s chief economist, said much of the rise in billings reflects improvements in the housing market. “Construction Economics 101 would say…when you build homes, you need stores, you need schools, you need health-care facilities, so it triggers this broader, supportive activity around it.” In October, home builders started new-home construction at an annual rate of 894,000 units, the highest level in four years.

Architects also are seeing a significant rise in business from the public-sector and from nonprofit organizations, including medical centers and colleges. Architecture firms getting the most business these days cater to institutions rather than to private companies developing speculative office buildings, which in the past has been considered some of the priciest and more-prestigious work.

Many speculative projects that entered the planning stage during the boom years, like Fifth + Columbia, a proposed 43-story office tower in downtown Seattle, remain stuck on the drawing boards. Bob Frasca, a partner in Portland’s Zimmer Gunsul Frasca Architects LLP, which designed the project, says he hasn’t heard from its developer in three years

Legat Architects, a 48-year-old Chicago firm, specializes in building transit projects and college and university facilities. The firm is currently working on a commission for Joliet Junior College, which involved about $150 million in classroom buildings, a campus center and research space.

“I think higher education has probably been the most-active market in the last year or two,” said Alan Bombick, a principal with Legat. Mr. Bombick says inquiries and billings are up this year, and the firm is currently building a hotel that is part of large mixed-use development being coordinated by the University of Chicago.

Firms that do business with architects report that conditions are improving, as well. Last year, A. Zahner Co., a Kansas City-based metal fabricator and engineering firm whose clients include top architecture firms such as Zaha Hadid Architects and Herzog & de Meuron, was laying off employees and cutting work shifts.

But this year, the firm is going into 2013 with a $15 million backlog of work. That is smaller than the $20 million to $25 million backlog that is typical in a good year but is a big improvement over last year, said Gary Davis, Zahner’s head of marketing. He predicts that billings will rise 10% between 2012 and 2013.

“There’s an optimistic view toward design again, and it’s not just the big firms,” Mr. Davis said. “People are calling about design questions again, rather than just calling to ask, ‘Do you have a cheaper way of doing this?'”

Neil Denari, a 55-year-old Los Angeles architect, gained international prominence after designing his first free-standing building, HL23, a 14-story condominium building along the High Line, an elevated park in Manhattan that was widely celebrated by the design community. Still, Mr. Denari had to lay off 12 of the 15 employees between 2007 and 2010, as billings fell 75%.

Now, with commissions on the rise, Mr. Denari has staffed back up to 10 employees and has four new commissions, including an office building in Los Angeles and a mixed-use harbor-front project in Taipei, Taiwan. He says he has entered a competition to design a research institute in Cleveland.

“We’re going to be putting more energy into pursuing educational projects, because that’s where a lot of the work is,” Mr. Denari added.

Write to Robbie Whelan at robbie.whelan@wsj.com