Global Shifts & Trends: 2017 Report Insights

1. AIA Foresight Report 2017

2. Global Perspective: Challenge and Change • POPULATION FLOWS • 244m • Number of international migrants worldwide in 2015 • (3.3% of global population) • Source: United Nations GEOPOLITICAL SHIFTS 121 Countries changed heads of state or senior-most leaders between 2015 and 2016 Source: U.S. State Department • SECURITY & MILITARY • $1.76t • Global national security spending (2015) • Source: Stockholm International Peace Research Institute

3. Global Perspective: Overview Despite sluggish performance in recent years, seven of the 10 most competitive global economies are located in Europe. Source: WorldEconomic Forum According to the World Economic Forum, the U.S. is the third most competitive global economy behind Switzerland and Singapore. Source: World Economic Forum Eight of the top 10 container ports, as measured by throughput of twenty-foot equivalent units (TEUs), are in China Source: CIA India is the world’s fourth largest IT start-up hub with more than 3,100 tech startups in 2015 alone. Source: Forbes • The top three growth economies (projected 2014– 2018) are: • Peru (5.4%) • Columbia (4.7%) • Chile (4.0%) • Source: Brookings Institution, FocusData By 2050, the working age population (ages 15–64) in sub-Saharan Africa is projected to reach 1.25 billion, which is triple its current amount. Source: IMF

4. United States: Social & Demographic Change Two-parent households declined from 87% in 1960 to 69% in 2016. Roughly 17% of kids in the U.S. currently live in blended families. By 2055, the U.S. will not have a single racial or ethnic majority. 59 million immigrants have come to the country since the middle 1960s.

5. Health of A/E/C ARCHITECTURE FIRM LEADERS SENTIMENT ON U.S. MARKET Bullish TOTAL CONSTRUCTION SPENDING 2006-2016 Bearish Neutral

6. The Big Picture: Collaboration NEED FOR COLLABORATION 20% Percentage of typical large project in mining, infrastructure and oil and gas construction that runs over schedule Source: McKinsey & Company COLLABORATIVE CONTRACTS? 5% Percentage of billings earned through providing IPD services (2015 responses)* Source: 2016 AIA Firm Survey Report NEED FOR COLLABORATION 80% Percentage of typical large project in mining, infrastructure and oil and gas construction that runs over budget Source: McKinsey & Company

7. Consumer Trends & Preferences • CROWDFUNDING TOTAL BY 2025 • $96b • Half is expected to come from China. • Source: The Guardian Key indicator for economic health Paradoxical trends: hyper-customization, instant gratification, experience-focus, sharing economy 3D printing predicted by some to play key role in customization

8. Market Sector: RetailComing together of tech, traditional retail, experience, and culture AI-powered mobile shopping assistant Amazon goes bricks-and-mortar TRADITIONAL RETAIL TECHNOLOGY EVOLVING MODEL OF RETAIL Westfield Labs integrates tech and shopping center experience Samsung 837 product demonstration and cultural events space EXPERIENCE CULTURE

9. Market Sector: ResidentialHousing the generations Millennial families • Millennials are now the largest generation. • 62% of millennials believe they will one day own a detached single-family home. • 14% millennials live in multi-generational homes. Aging boomers • 10,000 baby boomers turn 65 each day. • Relatively wealthy and healthy generation of retirees who will likely redefine retirement as more active and engaged phase of life.

10. Market Sector: Healthcare Leading ChangeGrowth in scale and impact + change in industry ALTERNATIVE DELIVERY 43% Respondents who got an EKG at home (results sent via phone by their doctor) 34% of respondents got an MRI at a retail clinic or pharmacy Source: PwC • TALENT DEMAND • 12.9m • Projected global shortage of healthcare professionals by 2035 • Source: WHO • 7 of the 10 • occupations expected to grow the fastest between 2014-2024 relate to healthcare. • Source: U.S. Bureau of Labor Statistics • By 2025, healthcare insurance and services is predicted to be the world’s largest retail market • Source: AFLAC

11. Market Sector: WorkplacePush toward flexibility, balance, and experience Workplace redefined • Forbes’ number one workplace trend for 2017 is the increasing demand for improved employee and candidate experience. • Only 11% of respondents to a Steelcase survey were highly satisfied with their work environment. COWORKING SPACES: PREDICTED INCREASE

12. Market Sector: Education Five key trends in education that can affect need for and design of space • Students will interact with others remotely. • The success of tech will still rely on skilled teachers. • We’ll think differently about the diploma (i.e., society will move toward competency based certifications rather than traditional diplomas). • Students will have a voice (students will shape own experience). • Educators and institutions will be forced to adapt. Source: Fast Company

13. Operations & Talent Trends TOP 10 TRENDS IN HUMAN CAPITAL #6 Design thinking: Crafting the employee experience (#1 is “organizational redesign: the rise of teams”) Source: Deloitte • BENEFITS THAT ARE MOST HIGHLY CORRELATED WITH EMPLOYEE SATISFACTION (FROM A LIST OF 54 BENEFITS) • Health insurance • Vacation/PTO • Retirement planning options like 401(k)s and pensions • Source: Glassdoor Economic Research

14. Operations & Talent: The Generations • GENERATION SHIFT • Gen Z • Will begin to enter the workplace in 2020 • Source: Fortune AGE OF ARCHITECTS (AIA MEMBERSHIP DATA) • GENERATION SHIFT • ~50% • Of workforce will be Millennials in 2020 • Source: IBM

15. Operations & Talent: Diversity & Inclusion “In order to create lasting cultural change, equity, diversity and inclusion needs to become a core value of the Institute that is part of our DNA. Beyond what we say, ‘EDI’ needs to be the ethos of how we think and what we do.” ROSA SHENG, AIA Perceived representation of women in the field of architecture Source: AIA Diversity in the Profession of Architecture Report, 2016

16. Finance: Mergers & Acquisition (M&A) Continue Despite cautious corporate investment environment, M&A deals continue. • IN A/E/C • 78% • …of architecture and interiors firms (and 68% of participating firms) reported their strategic plans for the next five years include M&A • Source: Zweig Group • U.S. M&A DEALS IN ALL INDUSTRIES • $4.7t • …topping 2007’s record for deal value • Source: KPMG

17. What’s Changed Since the Great Recession? Talent competition • Great Recession resulted in tens of thousands of architects leaving profession; many were unable to return • Many firms consolidated • Recovery has highlighted huge gaps in experienced talent pool • More services for same fees during Great Recession “trains” clients to expect more • Change in scale of projects pursued by smaller and larger firms alike • Fact- and evidence-based design decisions enable demonstrable value

18. Toolkit Better assess client needs More solution options Project economies New negotiation and contract terms Technologies financial models Service offerings Marketing Innovations available New ways of presenting firms and value to markets Brand design + storytelling Expand array of service offerings to capture greater share of project and new forms of value

19. Adaptive Strategy Lessons Versatile Design Some firms found alternate income in complementary design endeavors such as furniture and products, brand and graphics, and even software. New Geographies When one market is down, others may be up; Firms large and small have diversified their portfolios by exploring new markets at home and abroad. Client Diversity Like geographic markets, client verticals will go up or down in opposing cycles. Seeking clients on different economic cycles has been one successful strategy for firms. Contract Innovations Firms have recaptured more projects through supervising construction of specialized building components and seeking retainer agreements. Service Diversity Firms have expanded their offerings to include diverse services such as property management and organizational development consulting.

20. Technology: IoT HACKING THE IOT According to a story in CSO, hackers at the Defcon security conference found 47 new vulnerabilities that affect 23 devices from 21 manufacturers. INTERNET OF THINGS OFFERS POTENTIAL IMPACT OF $4-$11 TRILLION PER YEAR

21. Technology: Smart Cities/Smart Buildings • India’s smart cities Initiative • 98 • cities & towns • ~35% • of India’s urban population • +$150 billion • in investment • SOURCE: Times of India • KEY POINTS • Unprecedented IT infrastructure need draws large tech companies into A/E/C. • Many key concepts in how to implement smart environments still need to be defined. • Designers must tackle how to shape simultaneous experience of physical and digital world.

22. Technology: Cybersecurity $14b 2016 U.S. national cybersecurity spend SOURCE: WHITEHOUSE.GOV $19b 2017 U.S. national cybersecurity budget SOURCE: WHITEHOUSE.GOV Global cybercrime losses by 2019 are estimated to reach $2.1t an increase of 200% from 2011–2016 SOURCE: JUNIPER RESEARCH

23. Technology: Future Tools of Design 40%-50% Expected increase in productivity by 2025 due to machine learning and automated technologies SOURCE: MCKINSEY EXAMPLE TOOLS FROM ARCHITECT MAGAZINE Scaled digital tools that streamline the design-to-fabrication process, blurring the line between design and the means of construction The combination of computation and robotics as a tool for unique and custom projects rather than mass production Large-scale composites as a material for new forms of building facades LIDAR scanning technology “to move beyond surveying and into design so we can make models of the world without having to model the world”

24. Sustainable Design: Water • 663 million people (1 in 10) lack access to safe water. • 91% of the global population use an improved drinking water source, up from 76% in 1990. • 8 out of 10 people, still without improved drinking water sources, live in rural areas. • In 2015, it is estimated that 2.4 billion people globally had no access to improved sanitation facilities. • 82% of the global urban population vs. 51% of the rural population use improved sanitation facilities. • Economic benefits of investing in water and sanitation include an overall estimated gain of 1.5% of global GDP and a US$4.3 return on every dollar invested due to reduced healthcare costs for individuals and society, and greater productivity and involvement in the workplace. Source: WHO; WHO & UNICEF Joint Monitoring Report 2015

25. Sustainable Design: Materials • Key ideas and drivers • Materials transparency • Lifecycle assessment (LCA) • Reducing toxicity and emissions • New and experimental materials • Smog-eating buildings • Nemesi‘s Palazzo Italia (2015 Milan Expo) • Manuel Gea González Hospital • Coal-coatedaluminum • Building from mushrooms • Mycelium prototypes from Terreform ONE, Hy-Fy, University of British Columbia

26. Sustainable Design: Resilience and Cities • NEED FOR INVESTMENT • ~77m • Number of urban residents who could be driven into poverty by climate change by 2030 • Source: World Bank • SCALE OF IMPACT • +75m • Number of people who move to urban areas each year • Source: World Bank • SCALE OF IMPACT • 80% • of global GDP is contributed by cities • 55% • of the world’s population lives in cities • Source: World Bank

27. Sustainable Design: Active Transportation • WALKABILITY • 50% • U.S. residents say that walkability is a • top priority or a high priority when considering choice of home • Source: ULI • BIKE TRANSPORT • +62% • 2000–2014 increase in number of people traveling to work by bike. • Source: U.S. Census; ULI • CASE EXAMPLE • +80% • (to $3.4b) • Increase in property values in the Uptown neighborhood of Dallas after the 2006 installation of 3.5-mile Katy Trail • Source: ULI

28. Sustainable Design: Design + Public Health “The built environment has the opportunity to influence occupant behavior in support of a better long-term and short-term occupant health. Chronic disease, infectious disease and injury can all be mitigated by the way that we put our buildings together and the materials that we use to construct them.” LIZ YORK, FAIA Associate Director for Quality and Sustainability Centers for Disease Control and Prevention • GROWING LIST OF BUILDING STANDARDS BASED WHOLLY OR PARTLY IN HEALTH • International Living Future Institute’s Living Building Challenge • IWBI’s WELL standard • Fitwel from US Centers for Disease Control and Prevention (CDC), General Services Administration (GSA), and the Center for Active Design

29. Innovation Districts & Innovation Centers Firms & institutions TALENT Place creates Innovation ecosystem Idea generation & commercialization Facilitates • CAMBRIDE INNOVATION CENTER • Home to 3,500+ companies • CIC-founded companies have raised more than $2.7B in venture capital and strategic investment since 2001

30. Community Amenities & Shared Space Key trends and drivers • Rapid urbanization and density; urban revitalization • Demand for sustainable, walkable, connected communities • Popularity of mixed-use developments • Consequent transformation of suburbs

31. Public Infrastructure How should communities allocate their investment dollars? 60% Americans who feel infrastructure investment will improve property values, public safety, and attraction of new residents to their communities Source: Harris Poll Findings, Oct. 2016 PUBLIC SPACES (e.g., schools, parks, libraries) TRANSPORTATION (e.g., roads, bridges) Source: Harris Poll Findings, Oct. 2016 PUBLIC HOUSING (e.g., senior, affordable)

32. Public Infrastructure MOST IMPORTANT COMMUNITY FEATURES AMERICANS BELIEVE SHOULD RECEIVE A CONSISTENT LEVEL OF FUNDING (% of AMERICANS REPORTING) Source: Harris Poll Findings, Oct. 2016

33. Other AIA Resources The AIA has produced a number of other resources for practitioners and firm owners who wish to better understand the changing landscape of architecture business and practice. • Firm Survey Report 2016: The Business of Architecture (available at aia.org/firmsurvey) • Client Insights: Data that Drives Business (available at aia.org/clientinsights) • Diversity in the Profession of Architecture (available at aia.org) • AIA 2030 Commitment Progress Report (available at aia.org/2030) • AIA’s Resilience and Adaptation Initiative (visit aia.org/resilience) • AIA Knowledge Communities (visit aia.org/knowledge)