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FEATURE-US architects hit the road to survive property crash
May 6, 2012 / 1:01 PM / 5 years ago

FEATURE-US architects hit the road to survive property crash

* Changes in business expected to last for years

* Architects' billing index shows rising business

By Luciana Lopez

May 6 (Reuters) - Working for one of the world's best-known architecture firms, Norman Morgan and Brent Sparks were used to new business landing on their desks.

But when the financial crisis struck in 2008, they abandoned the Fort Worth office of HKS Inc, jumped into Morgan's Ford pick-up truck and began to criss-cross the back lands of Texas, looking for any kind of jobs for the firm.

On their road-trip, they knocked on the doors of rural Texas hospitals they spotted from the highway, often with no appointment. Architects from rival firms were also on the ground, trying to drum up new clients.

Around the United States, architecture firms faced a stark choice during the credit crisis that had its epicenter in the property market: reinvent the way they got business or die.

The resulting changes to their business are likely to last for years even as some architects say they are seeing the first tentative signs of improvement.

The hospitals in the Texas countryside were more like the work HKS did in its infancy, rather than the work the global firm was doing in dozens of countries right before the credit crunch, said Ralph Hawkins, the HKS chief executive officer. The company's work includes such landmarks as the Dallas Cowboys Stadium.

"We found out that a lot of our competition was meeting with them," he added. "There was competition out there but there was work, and we were glad to get it."

Architecture firms downsized drastically during the crisis, said Kermit Baker, chief economist at the American Institute of Architects. "We estimate about 30 percent of payroll positions at architecture firms were eliminated from the peak in the middle of 2008."

Newcomers to the profession had it especially rough, with a 13.9 percent unemployment rate for architecture graduates during the aftermath of the crisis, according to a Georgetown University report.

LEARNED THE HARD WAY

But firms may be turning a corner. The American Institute of Architect's billings index, closely watched as an early indicator of the health of the construction sector, marked rising business for a fifth straight month in March after shrinking in September and October.

Many of the architects who have made it have learned the hard way how to survive. Once a money-maker for firms, feasibility studies had to be absorbed as a marketing cost at Clark Design Group in Seattle, said Brenda Barnes, one of the company's partners.

"We practically give that away," she said. "That fee has gone down to almost nothing."

On the other hand, the company no longer has to "buy the job," or charge ultra-low fees just to stay in business, as the firm did in one or two cases in the depths of the crisis.

"In some sectors it's getting quite busy in Seattle," Barnes said. Chief among them is the booming rental market as many Americans rethink the merits of home ownership. The apartment vacancy rate sank to a decade-low in the first quarter, according to real estate research firm Reis Inc.

Still, much of the work coming through is for renovations of existing buildings rather than new builds, a reflection of the still-struggling economy.

"Most of our (clients) are pretty high end, but even they'd rather go in and gut a place," said Eddie Fava, of the eponymous e.e. fava architects, etc in Charleston, S.C. "They were like, 'Can we work with what we have there?'"

That kind of work has encompassed everything from homes that used to sell for $1 million or more and now sell for six-figure sums to lower-end foreclosures, snapped up by out-of-town investors to turn into rentals, and industrial buildings that are transformed into event spaces.

Despite the "very slow and deliberate" trajectory back to normal, Fava said, "I think the storm has passed."

In Seattle, smaller firm Graham Baba Architects resorted to assembling Ikea bunk beds and buying pots and pans when it designed a youth hostel during the downturn, said principal and founder Jim Graham. Now the company has just about doubled in size - and is looking for more staff.

"We've hired five people in the last few months," Graham said. "We're probably in need of two more."

A particular bright spot is the restaurant business, which is "going gangbusters," he said. People may not be making big buys, "but they still want to treat themselves." (Editing by William Schomberg and Vicki Allen)

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