A/E firms: Happy Days are Here Again
by Sam Bennett
Daily Journal of Commerce
July 11, 2005
Four years ago, Kristen Scott saw a wave of business coming her way. A principal with the architecture firm Weber + Thompson, Scott said the signs were clear.
Seattle was one of the last major cities to see a big expansion in high-rise residential development, she said. "All the pressures were there: land prices, zoning, transportation problems and interest rates going down."
The housing boom, as well as strong markets for mixed-use and health care, has meant a surge in work for some local architecture and engineering firms, which have responded by hiring.
In addition to housing, sectors such as hospitality have spurred growth for firms like Wimberly Allison Tong and Goo, which is based in Newport Beach, Calif. Ron Mitchell, senior vice president at WATG, recently moved the firm's local office from Mercer Island to downtown Seattle – for the sole purpose of attracting new employees.
"We wanted to create an environment to recruit and retain staff," he said. The competition for qualified designers in Seattle, he said, has reached a "crisis level."
"It's been a huge turnaround," said Linda Moriarty of Gensler. "I don't know anyone who's not hiring."
At Weber + Thompson, the staff size has increased 28 percent since the beginning of this year. Revenues at the firm are up 89 percent in the first six months of 2005, compared to the same period a year ago.
To make room for new staff, the firm is designing a 40,000-square-foot building in South Lake Union for its new headquarters. Weber will initially occupy 20,000 square feet.
"We're really at capacity in our current space," Scott said.
Firms specializing in retail have also seen dramatic growth.
"For the last 18 to 24 months, we've been on a steady hiring binge," said Steve Epple, chief operating officer of Callison. "We've been ramping-up even more lately."
Callison has added 10 designers a month for more than a year, and still has 50 to 60 open positions. The firm has 522 employees in four offices; 496 of them are in Seattle. The firm is trying to expand beyond the 100,000 square feet it currently occupies in City Centre.
Health care and corporate offices are also fueling growth.
"All of our markets now are pretty strong," said Epple. "There's as much renovating and re-designing existing retail as there is new building."
Chicago-based Perkins & Will's Seattle office has doubled in size, and staff has grown from four to 22 people in less than a year. Science and technology projects have led the way, according to managing principal Doug Demers.
Mixed-use development has also been a bright spot at CollinsWoerman, according to principal Mark Woerman. The firm is lead architect on the 2200 mixed-use project on Westlake. Woerman said the success of 2200 is further proof that "the downtown lifestyle has become more attractive in the marketplace."
"Clearly, there's a race going on in downtown Seattle and Bellevue for who can bring projects on line," Woerman said.
In addition, he's seen increasing strength in corporate office, life sciences and technology and health care sectors.
To meet that demand, the firm has hired 15 designers since the beginning of the year, and will hire 10 more by year's end.
"The health care industry is responding to pent-up demand over the last couple of decades," he said. "A lot of our health care clients are doing more on the in-patient services side and that translates into more beds. The new twist is the Baby Boomer generation – their expectations for quality of service is much higher."
Hiring plateau
But the boom has been slow to hit some firms.
While others have ramped up in the last two years, Mahlum principal Bill Strong said his staff level has only recently begun to rise.
"In general, for us, things have been good but not fabulous," he said. The firm saw a spike in work immediately following the public education bond issues in the late 1990s, but much of that work has been finished.
He said the typical young couple with kids has been priced out of the Seattle area housing market and forced to move to places such as Marysville. But, he said, the same couple may not be inclined to approve a construction levy for their school district.
Mahlum's health care work has remained steady, and the firm will put more emphasis on higher education projects.
At Berger Partnership, a Seattle landscape architecture firm, staff levels have remained flat in the last year. President Steve Shea said the firm felt the economic downturn in 2001 and 2002. But he expects several park and school projects to come online. "We're anticipating a lot more work in the next six months," he said.
Below 1990s level
Few firms survived the 2001-2002 recession unscathed, and most said they have not reached the staffing levels of the late 1990s. GGLO and Mahlum, for example, both have about 20 percent fewer employees than four years ago.
"Everybody felt the whole run-up of the dot-com era wouldn't last," said Linda Moriarty of Gensler, which opened a Seattle office in 1999. "There has been a ramping up, but it seems a lot more cautious. People got burned in 2001 and 2002. Clients are optimistic, but responsibly so."
Gensler held its Seattle office staff level around 15 for the first few years. Since 2004, the staff has doubled.
"This year has been great," said Moriarty. "The economy has picked back up and projects are starting to happen. It's a good time to be back in the design field."
Gensler is designing mixed-use projects in China, and locally is seeing a surge in tenant improvements, including five projects for local advertising agencies. About six of its 24 designers work on interiors.
"We're also working with re-positioning office buildings – doing new lobbies and entrances to make them more competitive," Moriarty said.
Interior design has driven growth at Olson Sundberg Kundig Allen, according to principal Scott Allen. He said the firm's focus on using interior spaces, fabrics and furnishing to create "seamless architecture" has led OSKA to expand from 50 to 70 employees since late 2003.
"We don't have a strong desire to grow for the sake of growth, and we continue to be careful about taking on more work than we can do and do well," Allen said. "It is really a holistic balance between our values as designers and being responsive to our clients."
Office space, housing
While mixed-use and health care were resilient during the recession, new office construction is finally showing signs of recovery, according to Woerman.
"Businesses need to expand and grow and make changes," he said. "(Office development) has gone from completely dormant, to one where there's a much more intense level of activity for developers and property owners. There's a pent-up demand for office space."
But Woerman knows this window of opportunity will shut. "The natural fall-out is the race to see who develops the properties quickly and is on line to meet the first wave of demand. The last six months have been much more intense, as people are poised to move forward."
Mitch Smith of MulvannyG2 said office demand is one of the most promising signs the economy is strong.
"Commercial projects are getting the green light," Smith said. "It's been a really nice change."
Local architects and engineers, like everyone else, are also wondering how long the housing market will continue to thrive.
"Time is of the essence, so everybody is hurrying in now," said Woerman.
With median home prices still rising in Seattle, first-time home buyers are gravitating to entry-level units, which has kept the condominium market humming, Scott said.
Andy Martin, senior vice president at ESM Consulting, a civil engineering firm in Federal Way, said his firm's work in master planning resort communities has brought a 53 percent increase in revenues in the last two years. Even with gradual hikes in interest rates, he said developers are not suddenly going to change course.
"With the increased population coming to the state, housing should stay strong," Martin said.
Will Castillo, a principal at GGLO, said he noticed the beginnings of a surge in housing work in 2003.
"I honestly think the housing boom is still young," he said. "There's a lot of room for growth."
Scott agreed. "We're due for a 10-year cycle of positive growth in the high-density residential sector," she said. "We're 1 1/2 years into that."