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Engineers look forward to a better 2011

The American Institute of Architects’ Architecture Billings Index – a leading indicator of the industry’s economic health – in November 2010 reached its highest point since late 2007. But Oregon architects nevertheless expect 2011 to be another tough year.

With the state facing a budget crunch, school districts encountering similar circumstances and other public money pools drying up, architects don’t expect this year to yield the flood of public work that sustained many firms through 2010. Instead, firms may find themselves in fierce competition to design renovations, tenant improvements and other small projects that are beginning to reappear in the private sector, according to Tim Eddy, principal at Hennebery Eddy Architects.

Oregon faces a $3.5 billion budget shortfall over the next two years, making capital project funding unlikely. Portland Public Schools in May will go to voters with a $548 million construction bond; however, in November 2010, only one of five proposed school-bond measures around the state was approved by voters.

“Based on the state budget and all public budgets, we expect the public side of things to slow down in 2011,” Eddy said. “But private institutions are starting to think about smaller projects. We expect things to continue to pick up, but it’s still very slow.”

Even universities, which in 2010 solicited designs for many new residence halls, plan to restrict their spending in 2011, according to Cameron Hyde, a principal with Soderstrom Architects.

“Our public university clients don’t seem to have any money,” Hyde said. “The Legislature hasn’t figured out how to fund education and can barely keep services in place. The first thing to go could be capital improvement projects, unless they start printing money.”

The ABI, however, recently hit 52 – and any number over 50 indicates an increase in billings. A year earlier, it was at 46.1.

LRS Architects rehired five people in 2010, principal Steve Mileham said. He attributed the company’s success in 2010 to diversity of project types. Also, LRS three years ago began operating out of its Shanghai office.

“We’re doing a 1.2-million-square-foot project in Shanghai that will be a convention center and office,” Mileham said. “Having that office abroad has been helpful. It’s gotten us large projects that haven’t been available here.”

In Oregon, private work, though small in scale, was steady throughout 2010, Eddy said. His firm landed several renovation projects, including a revamp of the Spalding Building in downtown Portland and a renovation of a West End retail space for a new bike shop. Similarly, DECA Inc. also had steady work in 2010 performing storefront renovations and improvements at private clubs, according to firm principal Sallee Humphrey.

“There have been projects, but they’ve been smaller,” Humphrey said. “I think firms who have downsized are at the point where there are enough small projects coming in to sustain the staff they have. When bigger projects let loose, then hopefully people will start to hire back.”

Though more small projects may be available, competition is still fierce, Hyde said. He has seen other architecture firms quoting projects at-cost or less simply to land work. And even then, projects may not move forward for years, Hyde said.

“These projects are taking three or more years just to break ground,” Hyde said. “It’s almost as much work getting the job as doing the job. I hope it’s not the new way of doing business. But until someone shows us otherwise, this is how it is.”

Humphrey said her firm’s clients still are having trouble securing construction loans for projects. Lending practices, she said, will determine whether Oregon’s architecture industry will continue to recover.

“My hope is that 2011 will be better,” Humphrey said. “It has a lot to do with banks loosening up the money. People need to feel confident about investing again, and I don’t know when that will be.”