Sources+Design Editorial Advisory
Board 2010 Business and Design Outlook
Recently, we asked the members of the Sources+Design Editorial Advisory Board to predict what the coming year might bring to various sectors of
the design industry. Here are the questions–and the advisory board
members’ answers.
How would you describe the
current state of your sector of
the design/build profession?
Erik Peterson, AIA: We have seen a considerable decline in custom residential throughout the year as well as hospitality and commercial. Our clients are having a difficult time in securing funding for their projects thus resulting in them never starting or going on hold. There do seem to be great clients with great projects out there with interest in proceeding, but it is still very difficult to get the projects moving forward, either because of funding or red tape by the governing authorities. Clients are demanding that fees be cut to a level so low that it is almost impossible to make a profit. So many architects are out of work that it has created a very competitive environment such that fees are being undercut by other professionals that will hurt us for years.
Eric Strain, AIA: Overall, there is a 65 percent decrease in employment architecturally in Las Vegas according to the last figures shared from AIA Las Vegas. I have to trust these as I have seen no other information regarding past and present status. To be honest, I think the market [in Las Vegas] was over-filled as we had several firms moving here to do casino and strip malls--so to thin out that market, I do not see as a large loss. I get a very mixed read on the local market as well as Reno, when in a large AIA meeting, all you hear is how desperate and drastic it is, but my circle of conversations have been somewhat different. Times have slowed, but within a group that I’m more in contact with, it has not slowed as drastically as the AIA has indicated. These firms have not suffered the 65 percent staff reductions nor are they suffering a 65 percent cut in projects. They are busy, just not as busy as they were once, but the work is there. Each of these firms approaches design as the commodity they sell. It is more then the “service” others sell, but design is what they bring differently to the table than the typical, I-can-do-it-on-budget-and-on-time. The design factor seems to be a separation factor from those that are suffering the 65 percent layoffs and those that are not.
Randy Wells: The marketplace is the stabilizing, and I believe people are starting to see some light at the end of the tunnel without as much fear that it’s an oncoming freight train. In our business, we’ve seen a substantial uptick in companies looking for opportunities to properly position their brand and explore new channels of distribution.
Leanna Hoff Boers: The current state for many wholesale design showrooms reflects the rest of the economy. Sales revenues for furnishings and fabrics are down for 2009 from the year prior. Some furniture manufacturers have had to close their doors. A few fabric mills have gone out of business or discontinued fabrics – affecting both the fabric lines as well as upholstered furnishings. Designer’s clients have put some jobs on hold. The showrooms have had to reduce overhead expenses in every area of their businesses.
Gretchen L. Palmer: The possibility of a V-shaped recovery is becoming more imminent. There is sentiment though that due to the unexpected strength in the latter part of 2009, there may be a natural slowdown in the first quarter. Since our industry is tightly connected to job creation, which takes time to develop and filter through to construction, we see 2010 as being fairly flat to slightly up and will probably not see a notable up-tick until 2011. The overall market conditions have decimated both residential and commercial sectors, with new construction projects nearly coming to a halt over the past year. Sales of existing homes continue to be at greatly reduced pricing, but there is opportunity in the market for investors or buyers to purchase projects at discounted prices with the intention to renovate the property. The old adage that “cash is king” has never been more relevant and the majority of projects we see moving forward are personally or privately financed. Services are deeply discounted, as are materials, providing an opportunity for developers and investors to build quality projects with a lower cost basis. We have seen a significant number of vendors leave this marketplace as well as trades people, which is a natural contraction in a business cycle. Naomi Anderson: As it relates to the public relations/marketing profession, it’s down considerably due to budget cuts. There’s also a sense of fear that no one is listening to their message.
How do you see your sector of the design/build
profession changing during 2010?
Gretchen L. Palmer: Many in our industry are re-inventing themselves. Our research shows that firms that were specialty practices are expanding into other areas of business and taking on projects that would have been out of their scope of services just a year ago. There will be increased emphasis on maintaining low overhead and increased efficiency.
Randy Wells: I think that is really going to vary from business to business and from region to region. I believe that the key for any company right now is to take a close look at everything thing they do and make sure they are utilizing the time spent in the trough of this economy to prepare their business so that it’s relevant when the economy improves. From our perspective, we are continuing to execute our strategy of creating a new business model for design centers; one that is both designer facing and consumer embracing. Our Las Vegas Design Center is built around the A & D community, but we are also striving to make it a great place for consumers to learn about the value and accessibility of great design, connect with a designer or shop with their own and really create the home of their dreams.
Leanna Hoff Boers: In 2010, I see that the showrooms will continue to monitor the effects of the economy on their businesses, continuing with many of the corrections and changes they have made in 2009.
Naomi Anderson: I’m hopeful 2010 brings a resurgence ripe with new business/technical innovations that improves overall efficiencies for the profession. These challenging economic times will only make us stronger and better business people able to adapt quicker to market ups and downs.
Eric Strain, AIA: I think it will continue to thin out the firms and staffs that are in this profession strictly as a service (“We do buildings for you!”). I truly believe design will become even more important in the near future, and those firms that have excelled at design will prosper.
Erik Peterson, AIA: I think that we have hit the bottom of the recession and that we are in a positive swing. However, I think it will be three to four years before we have recovered to a healthy state of business. We will have to maintain low fees and low overhead. I think that unless we see funding loosen up, it will still be very difficult to see projects moving forward and jobs created. Because the professional fees and cost of construction are so low, we are going to see a loss in creative "good" design and poor construction quality that is going to be damaging. I think "green" design will take a hit because it costs more, and people are not willing to go the extra effort in this depressed economy with exception to government projects that will require it.
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Gretchen L. Palmer, a licensed general contractor, is principle of Scottsdale, Arizona-based PHG Development, an award-winning spatial design and construction firm specializing in residential and commercial renovations, and PHG Consulting and Design. |
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Architect Erik Peterson, AIA, founded Peterson Architecture and Associates in Scottsdale in 2002, a firm that specializes in high-end custom and developer residential design, as well as luxury commercial design. Notable projects include the design of The Ritz-Carlton Resort and Residences in Paradise Valley, Arizona and JW Marriott’s Camelback Inn resort addition in Scottsdale. |
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Are you more optimistic about the revenue growth for your sector of the design/build profession during the next 12 months as compared
to the last 12 months?
Leanna Hoff Boers: We are optimistic that 2010 will show an increase in revenues for showrooms. It’s important to continue to bring in new and fresh products for our design clientele that they can in turn share and encourage their clients to buy. Many people are ready to have a new look in their homes and offices, and it is our job to provide the tools to help them succeed.
Randy Wells: I’m certainly no economist, but all of our businesses are in some way tied to the housing and credit markets and employment rates, and we definitely need to see improvement there. While I am in hopes we’ll look back on 2010 as having been a better year than 2009, what I’m seeing right now leads me to believe that the first two or three quarters of the year will look a lot like a less erratic version of 2009. At present, at least anecdotally, we are seeing more stability in the marketplace and, hopefully, that will translate into a meaningful swing of the pendulum in all our favor in Q3 or Q4 of 2010.
Erik Peterson, AIA: I am always optimistic (to a fault). I think that our revenue will come from the commercial/hospitality work rather than the residential over the next 12 months. The fees on residential have dropped so low because non-licensed "designers" rather than architects can design homes, so that we cannot compete in this market any more. I think that the market is loosening up and that we will start doing planning work in order for developers to try to get funding and projects to move forward. If the healthy economy is three to four years out, the smart developer knows that it takes that long to get a project designed and approved before construction can begin. So next year is the year to start.
Eric Strain, AIA: I’m excited about the future, and during the next 12 months, I think you will begin to see a real separation between the firms that can design and those that “service.” I think clients will see the advantage, and while there might not be as many, they will understand the benefit of design and be willing to pay more for the reality of design. We will also be venturing into areas with more vigor than before. I think the idea of exhibitions, publications and design competitions sponsored through design arts grants is a relativity untouched market for a number of firms.
Naomi Anderson: It will be a slow progression upwards, but there are signs of positive growth in some sectors.
Gretchen L. Palmer: Our business is spatial design, which is a cost effective, powerful and interdisciplinary process encompassing architectural, interior design, landscape design and environment, and associated construction for both residential and commercial projects. Tying them all together saves time, money and energy. We are very optimistic about revenue growth. Although the overall market may continue to lag, we are poised to increase our market share. In the luxury home residential sector, our in-house emphasis has been on investments, therefore we continue to thrive. The commercial portion of our business has traditionally been distressed or under-valued properties, and therefore we are very optimistic new potential. We provide consulting services to developers in this sector and have seen a significant increase in these services.
What steps are you taking to restore your firm’s revenue?
Eric Strain, AIA: Promoting design even more than before, we are seeking audiences within lectures and publications beyond the architectural standards. We’re also looking for opportunity to collaborate with other firms and/or other disciplines.
Leanna Hoff Boers: We are fine-tuning many steps we have made prior to 2010, and continuing to focus on excellent customer service in all aspects of our business. Some of these steps that we are concentrating on include up-to-date displays on the floor that stimulate new ideas; continuing to offer to designers an “office” away from their office, with tables to layout projects, a quiet area to meet with their clients, fresh coffee and cookies; and meeting with designers in a six-state region, making presentations and updating libraries.
Randy Wells: In our case, we’re really focusing on adding value to the product we offer our tenants, which includes everything from expanding the audience of our design center to adding meaningful new events and tradeshows that create opportunities with new channels of distribution.
Gretchen L. Palmer: We are fortunate to joint venture with the SMA Institute, which does research on eco-demographics. The institute had the foresight to know that the market was going into a spiral well before the crash to be poised for the downturn and, as a result, our balance sheet has not suffered.
Erik Peterson, AIA: We have cut as much overhead as possible and dropped salaries and staff. We have diversified our work so that we are have more opportunities for work. We have used this year to market our firm while others have stopped marketing. We are using free social media networks to get our name out and stay in touch with our client base. Where do you see growth opportunities in your city or region?
Larry Lake, ASID: As the commercial and residential building business bottoms out, there will be new opportunities and new players. Many who suffered first will be back first, with new business plans and new ideas. Many new clients will emerge as the market settles and new capital finds new projects. The resale and redevelopment business will be the immediate opportunities. As failed businesses are replaced and homes are resold, design services will be needed to repurpose or personalize interior spaces. Lower purchase prices should provide more capital and provide the clients with more resources.
Erik Peterson, AIA: Infill projects and remodeling depressed projects will be big over the next few years. Finding new uses for existing facilities that are no longer valid for what they were designed for. More mixed use.
Randy Wells: In the Las Vegas market, I believe the real opportunity for growth lies in the interior design and furnishing of the homes and condominiums that are being snapped up. There are staggering numbers of homes in our area being purchased by both homeowners and well-heeled investors who realize the unbelievable values in our marketplace. Now is the time to bring this affluent customer into the fold and educate them on what our industry has to offer.
Eric Strain, AIA: Housing--yes, housing--affordable, multi-family housing for seniors and families. There has been very little completed here over the past several years and with this new economy there is even more of a need. The housing that has been completed here has all been high-end condos, and the affordable market has been largely ignored. Also, tenant improvements and rehab work.
Leanna Hoff Boers: We see growth opportunities with students who will become new designers. We also see that as the public becomes more aware of what a professional designer or architect can bring to a project to make it cost effective, well designed and a great experience--this could help increase our business through the design trade.
Gretchen L. Palmer: Sustainable building opportunities and government contracting.
What are your biggest concerns for your profession?
Architect and community activist Eric Strain, AIA, founded Assemblage Studio, his architectural practice in Las Vegas in 1997. The firm’s projects have won numerous AIA design awards. |
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Randy Wells is vice president of Las Vegas Design Center at World Market Center Las Vegas. Wells, whose background includes leadership positions in the furnishings industry, manages the center, a year-round, professional design and hospitality resource that includes 50 permanent furnishings showrooms. |
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Gretchen L. Palmer: One of the greatest concerns is ongoing credit restrictions. Despite the TARP money provided to the banking industry, it has not translated into increased lending. Conversely, they are using the funds to strengthen their own financial situation and bracing for the possibility of contingent commercial loan defaults. Conventionally, with the current interest rates so low it would be a good time for consumers, but unfortunately the liquidity crisis is slow to resolve and our industry will continue to suffer across the board. Locally, our concern is that the commercial market may delay our local recovery and local economic base, which makes it imperative that Arizona diversify our economic base.
Eric Strain, AIA: That LEED will become the only issue. LEED is important and should be followed, but it must be more than a point-counting chart. It needs to include quality-of -life issues as well--not just what product you use but how it is used, how light effects the interior not just that you have provided daylight. The quality of life needs to take a larger role in sustainability.
Randy Wells: Business as usual would be my biggest concern. I believe that the lack of transparency and the confusion surrounding price has been the biggest barrier to success our industry has faced over the past ten years. I believe that there are legions of potential design customers in every marketplace who are held back by a fear of being overcharged and a general lack of understanding of what a great designer can bring to their home and the potential for that designer to actually save them time, money and mistakes.
Leanna Hoff Boers: We feel that it is the job of the wholesale showroom to provide education to our clients through our presentations, professional seminars, reading, sharing information about newer, leaner, manufacturing techniques, sustainable products, etc. Concerns would be that the designer and architect keep up with educating and “invest” in themselves by attending seminars, reading and trying to keep up with all aspects of business. None of us can operate our businesses the way we did 20, 10, or even 5 years ago. The world is changing, and we need to change with it in order to succeed. As an industry, we are operating as more of a team, and we all need each other more than ever. Each of our successes is based on your successes, and vice versa.
Erik Peterson, AIA: That due to cost constraints, clients are putting less and less value on architects. With other architects devaluing us by lowering rates so low that it will be difficult to recover and will bring down the others by doing so. I think that we need to move to have our profession more valued, and thus worth the money that it takes to do a project the right way.
Do you predict your profession will do more in the area of cost control in 2010? If so, how?
Erik Peterson, AIA: The only way is for us to involve the builder in the process from the beginning, and fewer clients are willing to do this in this market. They want it to be competitively bid at the end, so that leaves the architect to do the cost control during the design. But with fees so low, we can't possibly provide this information, so it is a catch-22. Randy Wells: Everyone is looking at ways to control costs and eliminate unnecessary spending, but there’s only so much you can cut before you either diminish your value proposition, your product, your top line or all of the above. We work very hard to run an efficient business but we are committed to not making cuts in areas that affect service levels and, for 2010, we are actually dramatically increasing our outreach to both the design community and design-seeking consumers.
Leanna Hoff Boers: A challenging economy can force changes, and many good decisions that have been made during these times will be implemented, especially is cost control. We need to think through and document what we have done both right and wrong in our businesses, and make sure we keep these in mind as we move forward. We will need to change our business strategy to embrace a more long-term view, and look beyond 2010 with these strategies.
Gretchen L. Palmer: Our value proposition is to bring all facets of design and construction into greater efficiencies, and look to hone skills at cost containment. Clients need a trusted professional now more than ever to keep project costs in hand.
Eric Strain, AIA: Value for being different, as far as creating an image for a client and not just a building. The building should be the main “image” of the company, and too often it has come down to speed in getting the project done over a real quality to the building image.
How do you think the design/build profession should approach marketing to create new work for 2010?
Naomi Anderson: The future lies in sound marketing methods to include social media, referral marketing, public relations, solid target marketing, practice diversification and more. It’s important for the industry to provide a strong message to the community of the immense benefits of working with professional architects/designers.
Gretchen L. Palmer: In market conditions such as these, as a rule the buyer is very wary of doing business with individuals and businesses that are unknown to them. Therefore, networking through industry events and publications, social networking, and through friends and acquaintances is the best way to market. Our focus has been on referrals and being a sustainable partner, which translates into repeat business. Advertising to your specific target market is key, be sure to know who you want to reach and thoroughly research where those clients turn for their resources.
Randy Wells: Focus on what you are best at, that which differentiates you from the crowd. Develop a strong brand for yourself, one that is reflective of your strengths and skills. Market on grass roots level. There is no marketing better than reaching out and touching people to tell them your story and why they would benefit, whether it be professionally or personally, from what you have to offer.
Leanna Hoff Boers: Its important to continue and re-think marketing to create new work. Print advertising, direct mail, e-blasting, creating newsletters, utilizing the social media, are all important areas to educate your client. Before deciding what direction to take, it is critical to define first, who you are, and second, who is your potential client? Make sure whatever method you use will get to that demographic and be successful. Continuity is very important, as the message will be much better recognized if it is repeated in a similar format.
Eric Peterson, AIA: I think that our profession needs to come together and promote the value of what we do rather than to become so competitive from within that we devalue ourselves. I think that egos need to be put aside for the better of the whole. Our professional organization (AIA) should become a stronger force for us. I think that architects should become more involved in political decision making for our communities.
Eric Strain, AIA: We need to show more separation from the contractors, engineers and “drafting” providers. Design has to be the selling point. We need to emphasis the importance of the design ability we provide. It has to be more than on time and on budget. There is now a need to show a difference.
As we recover from the recession, what significant trends/styles/products do you see emerging in your
sector of the design/build industry?
Randy Wells: On our side of the business, home furnishings, there has been this place holder, sell-it-with-the-house mentality. Until recently, the cultural conversation surrounding the home has been about its financial value. For quite a few years, it was purely transactional in nature. I think that a lot of people were so wrapped up in buying as much house as they could that how they furnished it, how it felt as a home and what it said about their life’s journey took a back seat. Of course, the notion of the house as a component of one’s portfolio has been turned upside down. As a design center we are focused on introducing our constituents to the value and accessibility of great design. Tied to that, we are staunch advocates, as are our showrooms, of the home as an emotional investment; a sanctuary from the rest of the world, the center of family life, a place where traditions are started and life events are celebrated and a place where personal taste is displayed. I believe that families are spending more time at home and they are certainly thinking two and three times about where spend their money. Tied to that, I believe that when they do spend money it’s going to be on things that represent a genuine value. By value, I don’t mean cheap or necessarily inexpensive. Rather, I mean things that will last, things that are timeless and resonate strength, quality and authenticity. Hopefully, the combination of emphasis on time at home with family and friends and products of authenticity and value will conspire to influence the way people purchase home furnishings. I suppose it’s more of a perspective on the process of purchasing for the home than it is a design trend, but I would love nothing more than to see people focus on buying individual pieces, one at a time if necessary, that tell a story about the way they live or aspire to live, parts of the world they love or their family’s heritage. There are few things more satisfying than purchasing and living with things that you love, especially when they make a positive contribution to time spent with family and friends. The word they used to use to describe it was luxury. I think it will be back.
Larry Lake, ASID: I believe there is a new design style emerging in the Southwest, one that is cleaner and lighter in style--a style that will move us beyond Tuscan and European interior styles. This style is a movement to natural interiors that embrace the regional vocabulary and reflects the changing lifestyles of our clients. Lighter and more natural colors and materials will reflect a desire for a cleaner, simpler and more sustainable future. After such a dramatic financial upheaval, price will be a major factor in our future projects. With clients looking for a deal, and suppliers in jeopardy, designers will have to sell value. Clients will continue to demand quality and style, and will pay when it’s important to them. Designers will need to demonstrate cost and quality, and why design and products can bring value to their project. Some products and details will have to cost less in order to meet new budgets and constraints. Creativity will be needed to meet these new parameters.
Leanna Hoff Boers: As we recover from this latest economic challenge, we are going to sharpen our focus on what has helped us get to our 25th anniversary in business-- taking care of our customer. We will continue to maintain good relationships with our vendors, and we will make sure we have a fresh and inviting space to work in with new product to invigorate our clients. We’ll be open to new opportunities as they present themselves, and look for ways that we can help to educate our client in product as well as in business. We will continue to promote the wholesale-to-the-trade model for showrooms, and recognize the fantastic relationships that we appreciate with our industry associates and colleagues. We will also look into more ways that we can give back to the community through efforts with charities and helping those in need. “Those who say it can’t be done should not interrupt those of us who are doing it.”
Gretchen L. Palmer: We will see an increased emphasis on sustainable building practices, energy efficiency, and renewable and recycled materials. Our focus when doing renovation work is to ensure that we don’t populate our landfills. Materials removed from our projects are re-used for alternate purposes or donated for re-use by others.
Erik Peterson, AIA: Certainly everyone is going to sustainable products, locally made (regional) materials and faster/cheaper/easier products. Hopefully this doesn't mean less value, but more value added. It would be nice to see regional styles emerge from this, meaning a building in Arizona looks different from a building in Florida or Massachusetts. Naomi Anderson: Sustainability, universal design, healthcare/assisted living, holistic design and more.
Eric Strain: Design is our product and this needs to be reinforced.
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