If there’s one coal-mine canary for New York City real estate, it’s the architecture firms that create project blueprints — often years before the public knows anything about them. Today, as the economy resists any sort of clear classification, pundits and economists may learn a thing or two about where exactly the market is going, by turning to those architects to find out what kinds of projects are actually in the New York City development pipeline.
In this month’s Q&A, The Real Deal did just that.
The architects we talked to said that much of what they’re working on is institutional and infrastructure projects, like the reenvisioning of LaGuardia Airport that Skidmore Owings & Merrill is working on for the Port Authority, or the modernization of the Jacob K. Javits Convention Center that FXFowle is doing. In addition, they are also beginning to draft plans for some new residential projects and some stalled condo projects that were tabled two years ago and are finally getting dusted off.
But while sources said business is significantly up over last year and that architecture firms have been hiring, the industry is still dealing with project slowdowns, bank workouts and all of the other issues that their developer clients are facing.
As a result of the increased competition for projects, some say that firms are undercutting themselves by offering deep discounts to do the so-called up-front work, such as the consulting needed to get a project off the ground. Meanwhile, many firms have increased the amount of work they’re doing overseas, including in China and India. As one source put it, “India only has 50,000 architects and they need 500,000.”
Back in New York, many said the age of starchitecture one-upmanship is over (see this month’s Closing interview to hear what Richard Meier has to say on that).
For more on the types of office renovations taking place, on the waning of the “starchitect” culture and on competition between firms, we turn to our panel of experts.
Tom Vacchione
Tony Vacchione
partner, Skidmore Owings & Merrill
There are obviously very few new multi-unit residential projects being built these days. What other sectors are providing the most work for your firm right now in New York?
We’re working on the replanning of LaGuardia Airport, we’re doing the new facility for Delta Air Lines at JFK Airport and we are working on Penn Station here in the city. There are [also] a number of academic buildings, including a new school for the School Construction Authority in Queens. And we have two schools under construction on 57th Street, which is a private/public project with Worldwide and the School Construction Authority. We [also] have John Jay College and, of course, the work the firm has been doing on Tower One at ground zero, so for us it’s a variety of different projects.
How much is business up or down compared to a year ago?
Compared to last year, our business has definitely been going up a good 15 to 20 percent. We’ve hired a number of individuals. I think there is enough work around the city that people we are interviewing have multiple offers coming to them, so there really has been an upswing of work. … It’s not the levels of early 2008, but it certainly is at very significant levels more comparable to the last 20 years. There are new opportunities occurring in the city and there have been numerous opportunities outside it.
We’ve reported on how a lot of firms had to diversify the work they did during the downturn, including taking on more international work. How much of your company’s revenue and work is coming from overseas or other parts of the country now?
About 50 percent of our work is outside the U.S. Back in the early ’90s, after the last significant turndown, we deliberately diversified and refocused on transportation, health care, education and interiors. At the same time we continued to refocus ourselves abroad, so even in the ’90s a lot of the firm’s work was outside the U.S. The firm has had a history since the ’50s of doing work abroad, so we renewed that interest and started to invest in China, the Middle East, and also had an office in London. In the last three or four years we’ve invested heavily in India. … For the last three years we’ve been working on the rebuilding of Mumbai Airport, which is under construction now. India only has 50,000 architects and they need 500,000.
On the commercial side, we’ve written about companies moving toward smaller work spaces, but bigger common spaces. Is that something you’re drafting plans for these days?
Absolutely — starting two years ago when we redid our own office. We decided that people didn’t really need large work spaces, but we needed more spaces where people could congregate and exchange ideas. We find that is true in all the business sectors. A lot of the private offices are going away, and even the cubicles are going away. … In education facilities we’re putting more space in between the classrooms so there are informal areas. In the master plan for the new Colombia University there was a deliberate mix of different types of open spaces between the buildings.
What would you say is the most exciting project architecturally either being constructed or in the pipeline in New York City today?
For me it is the infrastructure projects being planned, including the renewal of the airports, the renewal of Penn Station, and hopefully we will continue going forward with the [ARC] tunnel between New Jersey and New York. Also all of the park work being done around the periphery of the city, filling all the unused spaces. It’s the work the [Department of Transportation] is doing to create more pedestrian areas within the city where people can relax and sit down, as well as the bike paths they’re building. I think we’re creating a much more humane city that focuses on people and transportation.
Dan Kaplan
Dan Kaplan
senior partner, FXFowle
What’s the most negative trend you’re seeing in the architecture world in New York today?
At this stage of the cycle, there is a lot of “up-front” work — work needed to get the project off of the ground. This is good news from a creative side. However, we have — along with many of our colleagues — been our own worst enemy in providing this work at a deep discount or in its entirety.
There are obviously very few new multi-unit residential projects being built these days. What other sectors are providing the most work for your firm right now in New York City?
Actually, multi-unit residential in the Northeast is one of the first project types to come out of the recession, and there are indeed opportunities. We have just completed design drawings for a 175,000-square-foot residential tower in Chelsea.
We reported during the downturn about the shift in the kind of work architecture and construction firms were doing to stay afloat, such as more renovations rather than ground-up construction. Is that still the case?
Our largest project is the modernization of the Javits Center. This is representative of the type of work that the entire industry will be doing for many, many years. Our building stock is aging. Most of our buildings need some sort of revitalization, energy efficiency, systems upgrades and aesthetic reconsideration. It is also the most sustainable thing we can do.
Are New York developers still scaling back on architectural designs and going with bare-bones plans as a way to save money?
Actually we are seeing the opposite. In both developer and institutional projects, depressed construction costs are allowing for a bit more adventurous architecture.
How much of your company’s revenue and work is coming from overseas or other parts of the country now?
Our latest projects are in Istanbul, India and Brazil. All three of these locales have growing economies and a young, optimistic populous. Luckily for architects in New York, the world is indeed flat and we have a transportable skill. There is international demand, and I feel it is increasing, [especially] for expertise in designing large, complex, sustainable projects. From a practice point of view, the challenge is to keep the quality high and the designs … unique to a particular locale. It is quite unfortunate to see the same building in New York, Hong Kong, São Paulo and Riyadh.
Deborah Berke
Deborah Berke
founding partner, Deborah Berke & Partners Architects LLP
What’s the most negative trend you’re seeing in the New York architecture world today? The aggressive fee and schedule negotiation.
How is business doing compared to a year ago?
Business is significantly up for us.
We’ve written about companies moving toward smaller work spaces, but bigger common spaces. Are you seeing that too?
We are definitely seeing this trend, both in for-profits and in the not-for-profits. It requires the client being open to new thinking about how they work and getting away from the private-office-equals-status way of thinking.
Harry Kendall
Harry Kendall
partner, BKSK Architects LLP
What’s the most positive trend you’re seeing in the New York architecture world today?
Amidst the pervasive uncertainty on the part of our clients about planning for the future, we’ve been impressed by the increasingly widespread embrace of environmental sustainability as a goal. There seem to be real benefits from this in terms of a greater range of product choices at a lower cost, from [Forest Stewardship Council]-certified wood to photovoltaic panels.
How much is business up or down compared to three months ago, six months ago, and during the boom?
[Business] has increased during the past three months. There is a notable increase in general chatter — Requests for Proposals (RFPs), feasibility studies, inquiries. Our billings are down by about 35 percent from two years ago, but have been steady at that amount for almost a year.
What are you doing differently for developers architecturally now than you were during the boom?
The “arms race” to provide never-before-seen amenities to prospective buyers during the latter part of the boom is over — thankfully so, in our view. I wouldn’t say, though, that our developer clients’ attention to detail has diminished. They are seeking to buy and build more for less, and their emphasis is more on the comforts of home than on sleekness and newness.
Are architecture firms that downsized during the downturn starting to hire again?
We have begun to hire anew, though more at the junior level of experience than at the mid- or senior level. I also find that virtually all of our former staff have either found new jobs or have kept busy with freelance work.
Jared Della Valle
Jared Della Valle
president, Della Valle Bernheimer
What’s the most positive trend you’re seeing in the New York architecture world?
There’s a lot more interest in an entrepreneurial spirit amongst younger architects (and architects in general) that have had to diversify their practice and/or achieve different models of revenue, and a willingness to perhaps get back to taking some risk.
What’s the most negative trend you’re seeing?
The opposite of that: It’s a fairly bifurcated market. I think there are also a lot of architects either doing speculative work for free or cutting their prices to the point at which it’s hard for some people to compete. It’s incredibly competitive because it is not incredibly busy. It’s busy, but not ridiculously busy. Some people still want to do work too cheaply.
How is business doing now compared to during the boom?
For a small firm like ours it doesn’t take much to be at the same level we were before. We were maybe 18 people in the boom and now we are maybe 13 or 14.
What would you say is the most exciting project architecturally either being constructed or in the pipeline in New York today?
The No. 7 train. It is a piece of public infrastructure that is going to completely change an entire neighborhood.
Do you think there’s less of an emphasis on starchitects than there was during the boom, and is that a good thing or a bad thing for the field?
I think the sentiment of one-upsmanship is gone. I think bad titles like “starchitects” will be a lot less utilized. … [But], I think the whole concept of starchitects and those other things was very good for the architecture industry in a way, because there has been a lot of new great architecture. Walking along the High Line is incredibly rewarding for us because we have two buildings there, but it’s great for other people to see works by Jean Nouvel, Frank Gehry and Shigeru Ban.
Can you give us an example of something that happened on the architecture side of a project you’ve worked on recently that illustrates what’s going on in the market?
We are part of a couple projects that have severely slowed down or have been severely hampered, so there is a lot of false starting. There seems to be a lot of stacked-up potential for work, but with the promise of either the completion of an old project or the start of a new project, there is a lot of sitting on the edge of your seat. There seems to be general sentiment that there is a real potential for things to start. We see it in the interview process and we see it in our old projects, whether a bank is ready to solve their issues or a private client is ready to move ahead with something.
What’s the most surprising thing about the New York architecture world right now, given the recovering-but-still-fragile state of the market?
It seems like the most experienced people are out of work. Because the way that firms downsized created opportunities for younger people and they cut a lot of the middle out. … Generally I have found that if we put an ad out for a job listing and got 400 to 500 responses in eight hours, most of the people would be severely overqualified.
What’s the competition among architecture firms like for projects?
The number of people responding to an RFP for a university job or public development company is just ridiculous. It becomes really hard to think about responding to those because your chances are so limited.
How hard is it to land a job in this market?
We used to put our odds at one project in every 10; it’s probably one in every 15 now.
Nancy Ruddy
Nancy Ruddy
principal, Cetra/Ruddy
What’s the most positive trend you’re seeing in the New York architecture world?
After a two-year lull, properties are starting to slowly hit the market at prices that are beginning to make sense for developers. This, coupled with a slow loosening of the lending market, is creating an atmosphere of activity.
What are you doing differently for developers architecturally now than you were during the boom?
The new type of work involves analytic work for financing sources and possible purchasers of existing deals. We are reanalyzing zoning, redesigning floor plans, revising proposed finishes and working with investors on how to maximize their investment in this new, constrained era.
How much of your company’s revenue and work is coming from overseas or from other parts of the country?
Twelve percent of our revenue is coming from overseas compared to 5 percent two years ago. We plan to open an office in India within six months. [But] working with overseas local architects and engineers poses a challenge for a firm like ours. The place where numerous western architects have failed is the handoff of their designs to third parties who do not have the quality control that we demand.
Can you give us an example of something that’s happening on your projects that illustrates what’s going on in the New York market today?
We’re seeing projects that were put in the drawer two years ago being dusted off and getting finished so that we can start construction in 2011.
Rick Bell
Rick Bell
executive director, American Institute of Architects, New York
What’s the most negative trend you’re seeing?
There was great expectation that federal stimulus funds would lead to a major transformation of our city. Those hopes have not yet been realized, as transportation infrastructure projects — and the associated buildings — continue to be challenged by lack of adequate funding.
What can you tell us about the importance of international work for New York architects?
New York architectural firms are still seeing significant amounts of work abroad, from China to Abu Dhabi. The AIA New York Chapter’s “Made in New York” exhibition, which just opened in the subway stop at West 4th Street, shows and maps projects from around the world. Around 30 local firms are being featured in an exhibition opening in Moscow, [also] under the title of “Made in New York.”