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The winds of change are blowing.

Talk to Dennis Cusack, managing principal for Portland architecture firm , and it’s almost as if he can feel it.

鈥淚 think that’s one of the things that’s true of the entire industry 鈥� whether it’s a contractor or developer or an architect. It’s a different world out there today,鈥� he said. 鈥淲hat we were able to do four to five years ago, just building new buildings, is not the situation that we are in today and it is not likely to be the environment that we are in for the foreseeable future.鈥�

SRG’s revenue and overall billings dropped in 2011. And it’s not alone.

According to the , the United States’ western region in November scored 45.6 (a score above 50 indicates an increase in billings). The index is an economic indicator that reflects a lag of approximately nine to 12 months between architectural billings and construction.

Nationwide, billings increased 2.6 points to 52. It was the first positive mark since August, but it also was consistent with the up-and-down pattern for the past couple of years. For SRG, this year’s decrease in revenue came from a development slowdown in the public sector.

鈥淎s our projects have finished up that have been in the office for three to four years, there is just significantly less work to replace it,鈥� Cusack said. 鈥淎nd that work that’s out there 鈥� there’s an awful lot of competition for.鈥�

SRG lands 70 percent of its work from the public and institutional sectors, so a decline in revenue may be a telling sign of the times 鈥� namely, the recession is catching up with state coffers.

Jack Kenny, finance manager for Oregon’s Budget and Management Division, said that authorized funding for capital construction projects decreased from $1.3 billion during the 2009-2011 biennium to just $379 million in the present biennium.

Of that $379 million, only $59.9 million is general fund-supported debt 鈥� a significant decrease from the approximately $428 million in general fund money that the Legislature authorized during 2009-2011. The vast majority of the money from both periods went toward construction of the new Salem psychiatric hospital, for which SRG was a lead architect.

Additionally, of the $428 million in the previous period, Kenny said $149 million was set aside for higher education and community college projects. This biennium’s budget includes zero dollars for such work.

Part of the reason for the decline now, Kenny said, is because of an Oregon state law that allows only 5 percent of incoming revenue to be issued as general fund-supported debt for capital construction. But another reason is the economy.

鈥淭here is still unmet need out there, but we just don’t have the resources to finance the debt,鈥� Kenny said.

Cusack said SRG stayed pretty busy throughout the recession, mostly because of the Salem hospital project. He’s not surprised the recession has now caught up to the firm because public-sector developers are typically the last to feel the pinch. Private-sector developers are the first to go, he said.

鈥淏ut they’re also the ones that are likely to be the first to come back, because if they see a glimmer of activity and a need for commercial office space or a need for rental housing, they can move quickly and they’re motivated to move quickly,鈥� Cusack said.

One of those companies returning to the development arena this year is A&R Development Co., which is helping build an indoor mountain bike park in Northeast Portland.

A&R principal Robert Sacks said that during the recession the company switched gears from developing its own properties to acting as a representative for other owners.

As a company that retains and manages its properties, A&R has felt the economic pinch mostly through its retail tenants that have struggled to make ends meet, Sacks said.

鈥淭he change in capitalization rates and bank requirements and all that stuff also has affected us,鈥� Sacks said. 鈥淗owever, in general, because we own and manage our own property, we’ve been able to weather the recession a lot better than many developers who live or die on the basis of whether they can have projects from which they can derive development and construction fees.鈥�

And lackluster consumer spending has made retail development a hard sell. In November, the AIA reported that a major reason for stalled construction projects around the country was because of dramatic tightening of underwriting criteria for commercial real estate loans.

Mark Paskill, vice president of in Portland, said banks are weary of retail development projects because 鈥� unlike multifamily projects that may have 100 separate tenants paying the rent 鈥� retail centers are dependent on the success of a few anchor businesses.

鈥淭ake a retail center,鈥� Paskill said. 鈥淵ou’ve got five tenants that are covering the income stream, and right now those five tenants are under stress because of the economy.鈥�

Portland’s has taken a similar route in recent years, by focusing on fee-based property development and asset management. It even created a branch company called to operate as a green consultant for property owners.

A&R, which has worked to renovate two downtown office buildings for a private company this past year, is slowly returning to property development, according to Sacks. He said he expects the retail industry to improve slightly next year.

Kenny said he expects the Oregon State Treasurer’s office to announce in January that it will pay off several long-term debt obligations, which could free up money for capital construction in the next biennium.

In the meantime, Cusack said he and many others will be brainstorming.

鈥淚 think we are all trying to think about what this new economy will look like,鈥� he said. 鈥淲here are there going to be opportunities for us to be successful, knowing that it’s probably not what we’ve been doing for the past five, 10 or even 15 years?鈥�