Architectural Outlook for 2020

Close up view of architectural sketches on white paper with a yellow pencil and black protractor on a table.

Author: Karen Andrews, Senior Relationship Manager, Professional Services Group 

Planning for the upcoming year can sometimes be a challenge, but 2020 may top other years for difficulty. Who do you listen to—the economist who says a downturn is definite, or the one who reassures you by pointing to consumer confidence numbers? The answer: consider paying close attention to sector trends and determine how to make them work to your advantage for the next 12 months and beyond.

Most Sectors are Growing, but Slowly

In cities across the nation, construction cranes are creating a virtual skyline as they turn architects’ plans into vibrant communities. The healthy economy that supports those building booms began nearly 10 years ago and is outlasting previous economic expansions—most begin to fade after five years. As architects prepare for the future—and the pivotal role their work plays in their communities—economic analysis will play an important role in choosing the projects to pursue.

The AIA Consensus Construction Forecast Panel projects overall expansion. “The outlook showing nonresidential construction activity continuing to expand reflects the underlying strength of the economy, even this late in the business cycle,” says AIA Chief Economist Kermit Baker, Hon. AIA, PhD. The following chart shows forecast growth by sector for 2019 and 2020:

Market Segment Consensus Growth Forecasts

 

2019

2020

Overall nonresidential building

3.8%

2.4%

Commercial/industrial total

2.5%

1.1%

Hotels

3.6%

0.5%

Office space

6.9%

2.2%

Retail

-0.8%

0.3%

Industrial total

6.4%

3.3%

Institutional total

4.9%

3.7%

Public safety

8.2%

5.9%

Healthcare facilities

2.7%

3.7%

Education

6.1%

4.4%

Amusement/recreation

4.4%

1.0%

Religious

-4.5%

-2.8%

Source: American Institute of Architects

Boomers are Trend Drivers

Supporting the AIA forecasts is Bureau of Labor Statistics data that point to healthcare as a sector with potential to grow revenues in 2020 and beyond: “…demand is expected for more healthcare facilities as the baby-boomer population ages and more people use healthcare services.”

For those baby boomers, healthcare needs are becoming increasingly tied to lifestyle preferences. In-house healthcare services—with a continuum of care from independent living through assisted living to nursing care—are often a must when shopping for a senior living facility.

For architects working in senior living, Building Design + Construction advises “… providing easier access to visitors and to encourage outpatients to use the services, [so that] rehabilitation gyms, spas and fitness areas [should be] placed closer to the entrance. The location of the amenities keeps a balance between private and public space while high-end design schemes attract younger visitors.”

Data Centers: The Bright Light of the Chicago Economy

Data centers are critical to the information infrastructure of the nation. Chicago is among the nation’s largest data center metro areas. At DICE Midwest, a recent data center conference held in Chicago, the takeaway was that “…data center expansion could continue even if the economy hits a rough patch because the use of electronic devices keeps growing regardless of consumer spending patterns.”

That is good news for architects focusing on commercial design for the data industry. Earlier this year, online research company Industrial Info reported “… tracking five projects valued at about $325 million in the Chicago, Illinois, metropolitan area. As data consumption increases in the U.S. and existing space is utilized to its fullest, the Chicago area is poised to gain more utilization as a data hub in the Midwest.”

Repurposing as a Growth Prospect

There is also promise for firms with a practice in repurposing existing sites, which can mean designs for empty suburban shopping malls or downtown warehouses and office buildings. Forbes estimates “about one-fourth of the nation's 1,100 shopping malls—or roughly 220 to 275 shopping centers—will close by 2022.” What has become the survival strategy for many malls is similar to the plans for the suburban Chicago Northbrook Court, where a closed big-box store has been repurposed into a sports facility, and plans for design and construction of apartments on the site of another closed store are underway.

Preparing for an Economic Downturn

Architects often are among the first to see signs of a slowing economy; their work is at the initial stages of projects, with completion years down the road. A long-term perspective may include focusing the practice on adding a new mix of sectors—particularly those characterized by higher margins—as well as reducing work in others that often lag in payment or are impacted by lower tax revenue, such as state and municipal projects. Along with new sectors, consider expanding your firm’s footprint into cities, counties and states experiencing economic growth. When considering any of these strategies, help ensure your firm’s ability to source capital in the future. For example, consider taking advantage of current low interest rates by securing a new line of credit, or expanding a current line of credit.

Ensuring your practice has a mix of skills and specialties to match the needs of the marketplace is key. That may mean continuing education, hiring specialists for new sectors or adding interns and new graduates. The Bureau of Labor Statistics indicates that the profession has a healthy pool of candidates: “With a high number of students graduating with degrees in architecture, strong competition for internships and jobs is expected.”

Chicago firms are ideally located to hire professionals as they study and graduate from schools of architecture at University of Illinois Urbana-Champaign, University of Wisconsin-Milwaukee, University of Notre Dame, Illinois Institute of Technology and University of Illinois at Chicago.

And finally, staying on top of emerging ideas is critical. The Chicago Architecture Biennial offers “…an expansive and multi-faceted exploration of the field of architecture and the built environment globally.”

The views expressed by the author are not necessarily those of Fifth Third Bank, National Association and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank, National Association.

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