A depressed housing market, tighter credit conditions and rising costs of key construction commodities are causing local business and community leaders to think twice before giving designers and developers the green light to build.
Alan Lamson, a principal architect and planning director in East Hartford, is concerned the government’s efforts to balance the national budget could be the proverbial straw that breaks the camel’s back.
While his firm, FLB Architecture & Planning Inc., is busy these days doing more zoning and permit work for clients, Lamson says his backlog has already started to shrink.
“We used to have projects in the pipeline that went out as far as a year,” Lamson said. “Those days are gone. Now it’s about four or five months at most.”
At URS Corp. in Rocky Hill, the backlog is even shorter.
“It’s stable but slow right now,” said Paul Schmidt, vice president of URS Corp. “We’re burning through our backlog as fast as we’re getting the work.”
Designers everywhere are feeling the pinch as revenue declines and construction spending drops.
According to the Architecture Billings Index, revenue at U.S. design firms dipped for the fourth straight month in July. The monthly index published by the American Institute of Architects (AIA) measures hours billed at firms and is a leading economic indicator that provides up to a one-year glimpse into the future of nonresidential building activity.
A score above 50 indicates an increase in billings. The July score of 45.1 is more than a full point below June’s 46.3, the most dramatic drop in a year. In May, it was at 47.2.
The AIA posted positive numbers earlier this year, signaling an economic recovery.
Kermit Baker, the association’s chief economist, says recent domestic and global issues are causing people to hold out on projects longer.
Nonresidential construction is taking other hits this year as well, according to the AIA. The amount of money spent on building projects in 2011 could drop at least 5.6 percent, according to the association’s semi-annual Consensus Construction Forecast.
Baker attributes the dip in activity to rising costs of steel, copper and aluminum and higher energy fees.
“Consumer and business confidence is poor and the overall economy has yet to pull out of the downturn that began in 2008, which both add to the general sense of anxiety and uncertainty in the real estate market,” said Baker.
“Spending on renovations of existing buildings has remained strong, but the depressed demand for new construction isn’t likely to improve until next year,” said Baker.
Baker believes that the construction industry hasn’t yet reached the bottom of the cycle and the lower scores will continue.
Schmidt said his designers are working on a handful of retrofit projects aimed at reducing energy costs. URS Corp. also has a few rail and surface transportation deals in the works.
Tyler Smith of Smith Edwards Architects in Hartford said his firm is “fortunate to be busy right now,” with public work, stimulus projects and a three-year renovation at M.D. Fox Elementary School in Hartford, which is scheduled to reopen in 2013.
While his firm is booked solid for the next six to nine months with design work, there is no telling how busy Smith will be when those deals wrap up.
For Smith, one word sums up the market for design services in Connecticut these days: sketchy.
“Typically architects are the first people to work on a project, whether it’s a new building or a renovation,” said Smith. “We’re the designers, so we plan and sketch it out before it goes to the builders.”
“Theoretically, the construction industry follows the architectural business, so if we’re busy now, they should be busy in a few months.”
There’s also bad news in the latest figures for inquiries. The new projects inquiry index was 53.7, also a considerable decrease from its 58.1 score in June.
The monthly new projects inquiry index had jumped up to 58.1 in June, a sharp increase from the 52.6 score in May.
The AIA also expects construction spending to increase 6.4 percent next year.
Lamson is convinced 2012 will be a better, busier year.
“I think we’re going to see encouraging signs of a strong recovery in 2012,” he said. “It won’t be 2006 again, but it won’t be 2008 either.”
Since the financial meltdown in the fall of 2008, the main problem has been too many designers chasing too few jobs. Lenders are still reluctant to dole out money for private commercial projects government funding is limited.
“This seems to be a case of not thinking it can get any worse, and then it does,” says Baker. “I think a lot of the problem now is that firms’ in-house projects are not going through as quickly as designers originally hoped.”
To be successful, design firms need to constantly communicate with clients about their projects, remain sensitive and open to concerns and plan for periods of stalled progress, said Baker.
Lamson said his small architectural firm is doing more zoning work and securing development and building permits for projects it designs.
“It’s important that we’re flexible for our clients,” said Lamson,
“We stay in touch with them often to make sure we handle anything they need. The days of taking on only signature projects or handling a part of the job are gone. Now it’s about figuring out what each client needs and what we can do to help them.”
