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Exploring The Business of Architecture

Exploring The Business of Architecture. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by. R obert McAllister. Exploring The Business of Architecture

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Exploring The Business of Architecture

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  1. Exploring The Business of Architecture

  2. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

  3. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by RobertMcAllister

  4. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by R EdMcConnell

  5. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by R E D DougConarroe

  6. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by B BrianBedford R E D

  7. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by B R E D D DarrinMoore

  8. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by B R E D D Architectural Consulting

  9. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by B R E D D Architectural Consulting Designed with Knowledge

  10. Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by B R E D D Architectural Consulting Designed with Knowledge

  11. Why Architecture? • How do you go to Europe and not study architecture? • It’s unique, fun, exciting, fulfilling • Professional services model • Real estate team needs us

  12. Today’s Consulting Tour Will • Describe the architecture industry • Give an overview of architectural history • Introduce Austrian and Hungarian firms • Share our trip expectations and answer your questions

  13. “As architects, our place on this planet is to improve the situation, not just offer a new style of something.”-WILLIAM E. VALENTINE

  14. Our Process • Interviewed 4 architectural firms • Jeff Keast • Paul Sapporito • Pahl, Pahl & Pahl • RNL Design • Attended Museum of Contemporary Art-Denver Design Competition

  15. Our Process • MCA-Denver Design Competition • Different architectural firms presented • “Fashion show” of works completed • Flavor of work, i.e. light & space. • Winner announced April 12, 2004 • David Adjaye – Adjaye Associates

  16. Key Attributes

  17. Key Attributes • Creativity & Form

  18. Key Attributes • Function and Usability

  19. Function and Usability - Space Planning

  20. Key Attributes • Business

  21. What is an Architectural Firm? • More than a draftsman… • Artist • Urban planner • Interior designer • Landscape designer • Facilities master planner • Engineering (acoustic, light and lighting, electrical, mechanical, heating, venting, and air conditioning…) • Project Manager • Builder • …

  22. Architecture Industry • 91,000 registered architects in U.S. • $400B in construction contract value • 66% new construction,34% renovation • 190,000 employed in U.S. • 2% of total billings are sole proprietorships

  23. Architecture Industry • Growing U.S. architectural service exports • $867M* in 1990 • $5.25B* in 2000 (*Construction, Engineering, Architectural, and Mining Services ) • Typical market segments • Commercial • Government • Private nonprofit

  24. Market Segment Business Cycles Private nonprofit Government Commercial

  25. Economic Influences on Architecture • The Perfect Storm • Dot-com bomb destroyed projects • September 11, 2001 – determines architectural decisions • Recession • Rising liability insurance rates • Firm Responses • Staff reductions • Contract labor and overhead reductions

  26. Factors Impacting Architecture • Outsourcing • Internet • Computer Automated Design (CAD) • 9-11

  27. Are Architects Profitable With … • Gross margins of only 4% to 12%? • Profit margins of 1%? • Varying customer requirements? • Mandated regulations?

  28. Revenue is Generated By: • Winning design competitions (a centuries-old process) • Winning government bids; cost-plus • Private sector projects; repeat business • Design-build • Diversified services (interior design) • Renovation and adaptation

  29. RNL Design Corporation

  30. Distinguished Alumni • Three EMBA Alumni @ RNL • John Rogers Class of ‘83 • Josh Gould Class of ‘95 • Phil Goedert Class of ‘98 • Phil Retired from the practice in December ‘03

  31. History • Firm founded in Denver in 1956 • 44-year history • Currently 4th largest firm in Denver based on billings • Offices in LA, Orange County, and Phoenix

  32. Practice Areas • Government • Commercial • Transit & Maintenance • Urban Design • Landscape Architecture • Corp Interiors • Facilities & Master Planning • Religious • Leisure & Entertainment

  33. Financial OverviewConfidential • Complete set of financials provided to team by RNL • Since 2000 RNL has followed industry trends • Reduced billings and reduced headcount • Change orders hard to get approved • Pipeline of future projects weak

  34. Financial Overview • In 1998 firm developed an 8-year strategic plan • Net Growth targeted at 15% • 11% growth, 4% inflation • Economic slowdown started 2nd quarter 2001 • 1998 thru 2001 growth exceeded plan • 2001 to 2003 growth on target

  35. Financials2001 • Two Net fee goals-established in 1988 • Opportunity Growth • Strategic Growth • Net fees goal was $23,000,000 • Actual was $ 18,788,000* * RNL Design portion

  36. Annual Report Quote “Early in the second quarter (2001), it became obvious that a slowdown was beginning to occur, as projects were being delayed, or were slow to start. Extra services orders were becoming harder to negotiate, and many projects were put on hold, with little advance notice…”

  37. Annual Report Quote “…as a result adjustments in staffing had a lag time, which resulted in higher indirect time and lower profitability than was planned. Adjustments in staffing and staff requirements continue to be a challenge”

  38. Financial • Revenue Allocation- $28,445,373 • Advertising 10% of Fees

  39. Costs & ROI • People = largest expense • Bankers set ROI • RNL CFO manages for positive ROI • How?

  40. Large Firm RNL Compete for projects 1 of 4 accepted Many new projects Architect is lead Wide range of services Creativity & Form Outsource internationally Small Firm Paul Sapporito, Jeff Keast Word-of-Mouth 1 of 5 accepted Reliance on repeats Architect is lead Specializations Function & Usability Outsource locally Large vs. Small Firm Comparison

  41. U.S. Develop schematics Write specifications Describe building process Movement to mixed use “Big Boxes” Build to invest European Develop schematics Don’t write specs Architect also the builder Compact city designs Mixed use cities Firm size comparable to U.S. Build to suit U.S. vs. European Firms

  42. Architecture in Colorado

  43. “We serve developers, politicians, and contractors. But I thinkwe really have to be the leaders.” J. ROBERT HILLIER

  44. European cities evolved from the castle (battlemented) walls Carcassone, France French guys using mortars Urban design origins in Europe – How Cities Evolved

  45. European architecture ranges from very old to very new Roman and Renaissance style Filippo Brunelleschi(Italian)1377-1446 Brunelleschi’s St. Maria del Fiore in Florence, built 1418-1434. First freestanding copula. Art-Nouveau to Modern to Deconstructivism Frank Gehry(American) Frank Gehry’s Guggenheim Museum in Bilbao, Spain. Built 1993-1997.

  46. Building styles you will see Neo-Renaissance style• Arched windows and promenade• square styling Hungarian Academy of Sciences, Budapest. Built 1864 Boroque and Rococo style• extremely ornate• gilded ornamentation• neo-classical “porch” Karlskirche, Vienna. Built 1716.

  47. Building styles you will see Neo-Classical style• Greek and Roman roots• Columns, columns, columns• Rounded pediments above windows Votikirche, Vienna. Built 1800’s. Hungarian Academy of Sciences, Budapest. Built 1864 Neo-Gothic style• elements of 11th and 12th century gothic style• mostly churches• height and spires — “lifting to the heavens”

  48. Today’s Economic Report

  49. Austrian Architecture Market • Country Economic Growth • 0.7% in 2003 • 1.7% in 2004 forecast • 2.5% in 2005 forecast • Construction growth of 2.5% • Important Projects • Vienna international airport control tower €20M • Vienna airport train station

  50. Hungarian Architecture Market • Country Economic Growth • 2.9% in 2003 • 3.5% in 2004 forecast • 3.8% in 2005 forecast • Construction Growth 12.9% January ‘04 vs. ‘03 • Important Projects • Tran European North-South Motorway €1B • Magyar radio building €40 to €60M • 40,000 new homes

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