Beyond the Pandemic: The Upswing of Architecture
After a challenging 2020, the architecture industry is enjoying a resurgence of business, with some firms challenged to find enough architects for the rising workload.
At the beginning of 2021, it was hard to find an optimistic outlook for the U.S. architecture industry. The AIA Consensus Construction Forecast Panel predicted a 5.7% decline in nonresidential construction spending, while research firm IBISWorld warned of a tough future for an industry where low single digit annualized revenue growth rates would be likely in the coming years.
But that was before the Biden Administration added another $1.9 trillion of fiscal stimulus into the economy and rolled out Covid-19 vaccinations nationwide. The combination propelled the U.S. economy to an annualized 6.5% GDP growth rate in the second quarter, as consumers spent stimulus checks and savings from what they didn’t spend last year on services like consumer goods, entertainment and travel.
By June, the AIA Consensus Construction Forecast Panel had significantly upgraded its outlook for non-residential construction—the lifeblood for architectural firms, accounting for about 75% of the industry’s revenue. The Panel still expects nonresidential building construction to decline 3.9% this year—significantly better than the 5.7% drop they forecast in January—and to turn positive in 2022 with a 4.6% increase in spending.
Business has flourished with the AIA’s Architecture Billings Index (ABI) reaching a score of 55.6 in August—any score over 50 indicates billings growth.
The outlook for industry revenue growth is also looking up. Research firm IBISWorld is now anticipating a 2021 annualized 7.3% revenue growth rate for the U.S. architecture industry, compared with the 4.3% projected at the beginning of the year. It’s not the double-digit growth rates other industries may achieve as the economy booms, but for a mature industry having endured a 19.1% decline in annualized revenue growth in 2020, architects are optimistic.
Too Much of a Good Thing?
A strong economy isn’t without its issues. From August 2020 to August 2021 the Consumer Price Index for all urban consumers (CPI-U) increased by 5.3% leaving architects to feel the impact of inflation and higher prices. By June, strong housing starts had slipped from March’s peak, and residential construction demand started to buckle under the weight of rising timber prices.
The strength of the U.S. economic recovery has also exacerbated the labor shortage. By mid-summer, roughly six out of 10 architectural firms and 80% of large firms with annual billings of $5 million or more were reporting difficulties finding architects and other staff to meet rising demand.
The Art of Architecture
Nonetheless, the art of building design is once again on full display across cities, especially in Chicago, with fresh hotel and condo skyscrapers adding striking new facades on one of the U.S.’s most iconic city skylines.
Chicago saw several once-in-a-generation hospitality and residential buildings debuting this past summer. Most notably, the 101-story St. Regis Chicago, designed by Windy City native Jeanne Gang of Studio Gang, just opened after nearly seven years on the drafting table.
Alessandro Munge of the Toronto-based Studio Munge has transformed the Carbide & Carbon Building—a 1929, Burnham Brothers designed Art Deco masterpiece, located at 230 N. Michigan Avenue—into the 364-room Pendry hotel.
On the residential front, the late architect Helmut Jahn’s last Chicago project—the 805-foot-tall, 738-unit rental tower dubbed 1000M after its 1000 S. Michigan Avenue address—has resumed construction following a pandemic-induced work stop.
At the same time, zoning paperwork reveals that developer Jeff Shapack is proposing a new 26-story, 316-unit residential high-rise at 1353 W. Fulton Market Street as more than 1,000 units of housing were recently approved by the City Council for the Fulton Market neighborhood.
Restaurants
But it’s not all about massive new towers in Chicago. Hundreds of smaller projects, such as new restaurants and retail spaces, which can be lucrative for architectural firms, are showing off brand new looks. Chef Noah Sandoval used his time during the pandemic shutdown to tap architects for a renovation that has tripled the size of Oriole, his Michelin-starred restaurant in the West Loop.
The Future Looks Bright
While those traditional design sectors continue to heat up, the future of architecture in Chicago will likely be driven by economic growth in sectors like life sciences, distribution, and manufacturing, says Michael Fassnacht, the CEO of World Business Chicago.
"I’m very, very bullish that Chicago will become one of the top leaders in life sciences in the world," he said in a public statement. "We think a huge opportunity [exists] in connecting all the real estate developers’ start-ups with life science and health care, to make sure we have enough lab space."
Despite the economic challenges of 2020, the outlook for architecture is promising for the remainder of 2021 and beyond.