Please don’t read this if you have a weak stomach

October 04, 2012 |
Rob Cassidy

The American Institute of Architects has issued its triennial Survey Report of Firm Characteristics, “The Business of Architecture,” which documents the devastation that the economic recession brought down on the U.S. construction industry, specifically the architecture profession. It’s not a pretty picture.

As if you were unaware, the years 2008 to 2011 wrought havoc on the finances of architecture firms. Jobs at architecture firms actually grew 18% from 2003 to 2007 and continued to grow through mid-2008, but then the bottom fell out and more than 28% of positions at architecture firms vanished. From 2007 to 2011, payrolls in the overall construction sector declined by more than 2.1 million, nearly 28%, thanks largely to the tanking of the residential market.

Total construction spending (including homebuilding and public works projects like roads and bridges, along with commercial, industrial, and institutional buildings) dropped more than 20%, from $1 trillion in 2008 to below $800 billion in 2011. During the same period, gross revenues at architecture firms took an even bigger hit, plummeting more than 40%, from $44 billion in 2008 to $26 billion in 2011.

The $787 billion infusion from the American Recovery and Reinvestment Act, the great bulk of which went to “shovel-ready” infrastructure projects like highways, propped up the heavy construction sector for awhile, but very little stimulus money benefited architecture firms.

One way architecture firms tried to fight back during the recession was to expand their services. Even though virtually all firms had to lay off staff, more firms reported that they were offering new services, notably sustainable design, planning, interior design, and space planning.

Thirty-six percent of design firms also categorized themselves as “multidisciplinary”—a full 10 percentage points over the previous decade. The AIA report does not provide any data on how successful firms were in implementing these new service lines, or whether being more multidisciplinary improved the bottom line.

The most telling finding of “The Business of Architecture” is how much the profession of architecture is split between the haves and the have-nots and how much it remains a cottage industry. More than one in four architects (26%) are sole practitioners; four of five architecture firms (81%) have less than 10 employees. Firms of 1-9 employees account for 28% of architects, but bring in only 21% of billings.

From the reverse perspective, firms of 10 or more employees account for just 19% of all architecture firms, but employ 72% of all U.S. architects—and account for 79% of all billings.

More to the point, the giant firms—those with 50 or more employees—account for 37% of staff and 43% of billings, even though they represent only 3% of all firms. Large firms (50 or more employees) also produce nearly double the net revenue per employee of small firms—$136,000–138,000 per employee at the giants, vs. $70,000 for sole practitioners and $74,000 for firms with 2-4 employees.

The AIA report does not provide data on profitability, so it is possible that some small firms are more nimble and entrepreneurial and can manage their overhead costs better than large firms. Midsize firms (20-49 employees) also seem to be quite competitive, producing net revenues of $132,000 per employee.

But that 2-to-1 ratio in billings probably argues against too many of the Davids knocking out the Goliaths in head-to-head competition. +

Rob Cassidy | Building Team Blog

Robert Cassidy is Executive Editor of Building Design+Construction. A city planner, he is the author of several books, including “Livable Cities,” and was a co-founder of the Friends of the Chicago River.

Related Blogs

Illustration: Pixabay

December 30, 2016 | Building Team | Building Team Blog

Women AEC professionals need you to take action. 

Lissette Méndez-Boyer (left) and Natalya Shimanovskaya work on their FABRICation project at Beyer Blinder Belle’s New York office. Photo courtesy BBB

September 06, 2016 | AEC Tech | Building Team Blog

AEC firms are taking a page from the tech industry, by infusing a deep commitment to innovation and disrupt...

Intel Co-founders (l. to r.): Andrew Grove, Robert Noyce, and Gordon Moore. Photo: Wikimedia Commons   

June 27, 2016 | AEC Tech | Building Team Blog

“Sooner or later, something fundamental in your business world will change.” The late Andrew Grove (1936-20...

Photo: Mass Communications Specialist 1st Class Corey Lewis , U.S. Navy, via Wikimedia Commons; photo filter via

May 31, 2016 | AEC Tech | Building Team Blog

As buildings become increasingly connected, opportunistic hackers have countless avenues into a building’s...

Lexus RX 450h self-driving car. Photo: Wikimedia Commons

May 09, 2016 | AEC Tech | Building Team Blog

Despite popular belief, the country is not in a great age of technological and digital innovation, at least...

Deep Learning + AI: How machines are becoming master problem solvers

The world’s top Go player Lee Sedol puts the first stone against Google’s artificial intelligence program AlphaGo during the third match of the Google DeepMind Challenge match in Seoul, South Korea. Photo: Reuters/Google/Yonhap

March 31, 2016 | AEC Tech | Building Team Blog

Besides revolutionary changes to the world’s workforce, artificial intelligence could have a profound impac...

Yotel, New York City. Photo: JasonParis, flickr creative commons

March 09, 2016 | Hotel Facilities | Building Team BlogRobert Cassidy, Executive Editor

Hotels are going for a new minimalist look to attract younger guests, but some older business travelers don...

Is the booming freelance economy a threat to AEC firms?

Photo: Pixabay

February 24, 2016 | Architects | Building Team Blog

By shifting the work (and revenue) to freelancers, “platform capitalism” startups have taken considerable m...

How the Fourth Industrial Revolution will alter the globe’s workforce

Photo: Pixabay

January 26, 2016 | BIM and Information Technology | Building Team Blog

The next great technological metamorphosis will be unlike anything humankind has experienced before, due to...

Potential vs. credential: How men and women differ in career progress

Courtesy Pixabay

January 05, 2016 | Architects | Building Team BlogDavid Barista, Editorial Director

Recent research suggests that women face yet another career impediment: the confidence gap.

Add new comment

Your Information
Your Comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Overlay Init