Southeast Designers Look for the Market to Finally Improve
Designers in the Southeast are continuing to face market uncertainty, but as 2012 unfolds, more of them are starting to see some light at the end of the proverbial tunnel as the region's owners move more project plans off the shelf and into the field. It's not a boom, but architects and engineers seem ready for any kind of improvement.
The cause for optimism starts with a look back at the recent past. A year ago, ENR Southeast's Top Design Firms ranking revealed that 2010 revenue had declined again for the region's architects and engineering firms. Collective revenue stood at about $2.65 billion—or about 33% lower than two years before.
This year's ranking finally bucks that trend—not with a significant increase, but with a more modest leveling off. For the first time in several years, ENR Southeast's Top Design Firms ranking experienced a slight uptick in collective revenue to an estimated $2.68 billion.
If 2010 and 2011 represented a bottoming-out of the Southeast's market for design services, 2012 is so far suggesting that a coming upturn may be in store as executives begin to sound more upbeat than they have in years.
'Modest Pockets of Optimism'
Southeast designers are seeing glimpses of increased activity by some owners, depending upon the geographic region and building market. While J. Thomas Chandler, president of SchenkelShultz Architecture, Orlando, characterizes many owners as uncertain and "extremely cautious," he also reports "modest pockets of optimism" on a sector-by-sector basis. Others are more confident, such as Scott Murray, senior vice president of Stantec's Lexington, Ky.-based Eastern division that includes the ENR Southeast states.
"Over the past year, we have seen as much as a 20% increase in proposal requests for some client groups," he says. "Most areas of the Southeast are picking up moderately to slightly, although nothing dramatic, depending on the sector."
Dean Fox, president and CEO of Atkins North America in Tampa, also contends that the Southeast's design market is bouncing back from the bottom.
"Our clients' portfolios of projects have definitely stabilized and may be trending upward over the last six months," Fox says. "The pace of procurement has increased over the last two years, but it is still not near previous levels."
Overall, Fox adds, "The Southeast region seems to have stabilized as a whole."
Herb McKim, president and chief operating officer of architect-engineer McKim & Creed, Raleigh, N.C., also sees sporadic progress.
"The overall pace of new project activity has increased slightly in 2012," he says. Overall, he adds, more owners are choosing to move ahead with new project starts, "but it's varying dramatically by markets." The energy sector, for instance, is strengthening significantly, while the markets for municipal and private development projects are "still very depressed," McKim says.
SchenkelShultz's Chandler sees little change in owner activity. The pace of new projects is "the same as a year ago," he says, adding that "uncertainty levels remain high." However, he notes that "the overall market is bumping along with modest pockets of optimism."
Across the board, executives concurred that owners are continuing to seek added value from design firms, whether it be with expanded services, alternative delivery or just assisting with minimizing all of an owner's potential costs.
Stantec's Murray says the firm is "seeing more opportunities for integrated service delivery, and we are seeing more interest in alternative project delivery models across all markets."
The demand for alternative delivery and expanded technology services is an increasing trend in the transportation sector, adds Atkins' Fox.
"Our clients' focus on doing more with less has resulted in opportunities in asset management and intelligent transportation systems," he says of the trend. "Technical services strive to increase the performance of an asset through the use of technology and best practices."
Managing costs remains the guiding focus. Chandler says owners want "value-added building systems that reduce long-term operation and maintenance costs. Clients are asking, 'How can I get more for less?'"
The Numbers
The following ranking lists firms by the amount of 2011 design revenue generated from projects located in the four-state region of Florida, Georgia and the Carolinas. The main chart also includes each company's top regional officers, largest projects to start construction last year and top three markets listed by percentage.
Cumulative revenue for the 90 firms ranked here is essentially flat compared with the prior year, at about $2.68 billion. Collectively, the top 10 companies earned $1.48 billion in 2011, down from $1.55 billion in 2010. Of these, five reported increases—AECOM Technology Corp., CH2M Hill, HDR, HNTB Corp. and Stantec. Stantec said acquisitions were responsible for its increase.
Four top-10 firms had declines: Atkins, ARCADIS, Reynolds, Smith & Hills and Parsons Brinckerhoff. Zachry Holdings did not participate in last year's survey.
Also, a different firm tops the chart this year. Last year, CH2M Hill earned first place, which had previously been held by Atkins (formerly PBS&J) for several years.
This year, AECOM Technology Corp. gained the top spot by growing to $296.9 million in revenue from $222.2 million in 2010. Readers can find the rest of the story in ENR Southeast's profile of AECOM as this year's Design Firm of the Year.
