Despite recent struggles, 2004 looks to be the year when nonresidential building returns to healthy growth. "There are hot and cold spots in each of our markets," says Gordon Mills, FAIA, NCARB, chairman and CEO of Durrant, a Dubuque, Iowa-based A/E project delivery firm. "But overall, we see a breakthrough in 2004 to a level exceeding that of 2003."
Mills and five other executives from among the country's most successful Building Team firms saw nonresidential building's glass as half full during a roundtable discussion held at this fall's North American Construction Forecast in Washington, D.C., sponsored by Reed Construction Data and Building Design & Construction.
Earlier this year, Mills says Durrant was "cautiously optimistic" about 2004. "Now we are very optimistic, but cautiously so," he says.
The failure of the economy to take off in 2003 as many had anticipated has made firms wary of expecting too much in 2004. Michael I. Schneider, executive VP and director of corporate development, Parsons Brinckeroff, New York, says the company is looking to the future with "some uncertainty."
The crystal ball isn't as clear as it used to be, according to Charles Rodenfels, AIA, senior VP in the Columbus, Ohio, office of URS Corp. Firms used to be able to "forecast months and even years out," he says. "Today, it's not that easy to do with much confidence."
In response to the inherent uncertainties in the marketplace, firms, such as Durrant, URS, Skidmore Owings & Merrill, and Hellmuth, Obata + Kassabaum, are diversifying geographically, as well as by client and project type. Diversification has been a priority at SOM for the past five years, says Gary Haney, AIA, design partner in the firm's New York office. "Like many architects, we were heavily into speculative building and it almost killed us," he says.
Although corporate/commercial has been one of the hardest-hit nonresidential building sectors, it nevertheless remains HOK's largest business. Clark Davis says diversification has served the firm particularly well, especially over "the last couple of years, which have been challenging for many of us."
The Bernalillo County Metropolitan Detention Center in Albuquerque, N.M., completed in 2002, is an example of the growing city/county justice facility market, according to A/E project delivery firm Durrant.
While the commercial office market has plummeted in recent years, education, healthcare, and government have enjoyed growth. Although firms say reduced tax revenues and state budget deficits are dulling some segments of education and government work, other segments are continuing to flourish.
Durrant's Mills says that government commitment to education is not always being met with the necessary financial support for K-12, community colleges, and college and university projects. "We see this market responding to local influences, therefore it will be somewhat spotty around the country," he says. "K-12 will do well in areas where the funding stream has been successfully addressed." Through initiatives, such as bond issues, Durrant foresees robust activity in these areas. In areas where funding problems have been more serious, Mills says the firm is seeing signs that communities and school districts are beginning to address these issues.
Life-safety and health-safety considerations are driving large urban K-12 projects, says URS's Rodenfels. In Philadelphia, URS is involved in master planning a five-year, $1.5 billion project that affects 315 schools. "If anyone here is not involved in urban school programs, then you've been in a coma," Rodenfels told conference attendees at the National Press Club.
As for higher education, reductions in state funding and ensuing tuition increases have slowed university work and resulted in higher enrollments at community colleges, says Durrant's Mills. "Community colleges have continued to demonstrate an ability to finance and to build," he says.
Universities are adjusting, Mills says, by turning to private funding to meet pent-up demand for projects. "We've begun to see increasing interest and more request for qualifications at the university level," he says.
Building programs have become part of "an aggressive agenda" by colleges and universities to win the student recruitment battle, says URS's Rodenfels. Educational institutions have targeted student housing, sports venues, recreational and physical fitness facilities, and student unions for renovation and new construction. "Now they are getting back to some of the academic icons, such as libraries," says Rodenfels, whose firm is conducting a feasibility study for the renovation of the main library at Ohio State University.
In the government sector, the roundtable firms, such as HOK and Durrant, identified Federal-level renovation projects (many of them involving security upgrades) and city/county criminal justice facilities as growth markets.
In Washington, D.C., URS is taking part in the long-term renovation and consolidation of the Pentagon's intelligence infrastructure. Significant Federal funding also is being directed at rehabilitation, renovation, and improvement of nonmilitary structures, says Rodenfels. This includes URS involvement in the $540 million renovation of the 1.8 million-sq.-ft. Herbert Hoover Building, which houses the Department of Commerce, the White House Visitors Center, and the National Aquarium. "These types of buildings are getting a lot of attention and funding," says Rodenfels.
Over the past two years, new construction of criminal justice facilities has shifted from Federal and state levels to counties and cities. Durrant expects this market sector to be one of its strongest in 2004, says Mills. In states that are able to address their budget situations, the bulk of the work will be in prison additions to accommodate aging inmate populations and deferred infrastructure improvements.
An aging population, increasing life expectancy, rising fertility rates, and an increasing immigrant population, combined with the depression of cost containment in the '80s and '90s and advances in medical technology, make healthcare "nearly a boom market," says Durrant's Mills. "And it will continue to increase for some years to come."
"Healthcare consolidation, new technology, and very aggressive marketing for patients" are creating a market for large-scale ($300-600 million) healthcare projects, says HOK's Davis. HOK and URS both have large-scale projects to their credit: HOK with the Los Angeles County/University of Southern California Medical Center in Los Angeles now in the works and URS with a Spectrum Health institutional project under way in Grand Rapids, Mich.
Aviation is a strong market for many of the roundtable firms and security concerns and the continuing evolution of the airline industry should keep the sector flying high. According to SOM's Haney, aviation comprised 24% of the firm's billings in 2003. That figure stands to increase as security plays an increasingly critical role, says Richard Tomasetti, P.E., co-chairman, the Thornton-Tomasetti Group, New York. "We see millions of dollars being spent at airports, not just to catch up with the demand that's starting to come back, but to improve the security of these airports," he says.
Returning demand is spawning new projects for firms such as HOK, which is involved in the Indianapolis International Airport's new Midfield Terminal. The firm's Davis believes that the new tier of airlines and new business models for the industry will allow the market to take off.
After a period of years, which saw high-profile major league sports venues, such as stadiums, arenas, and ballparks, being churned out in nearly every major city in the country, a slowdown is expected, says HOK's Davis. College and university projects and minor league venues, however, will continue to fair well, says Thornton-Tomasetti's Tomasetti.
Since 9/11, many have predicted the demise of the tall building. However, SOM's Haney and Tomasetti believe the skyscraper will continue to occupy its place in the commercial marketplace. "Despite rumors to the contrary, the tall building is alive and well," Haney says. "Even the super-tall building is alive and well. What you will see are developments that make those buildings safer." These include structural improvements to resist progressive collapse, responsive building skins, wider stairs, concrete cores, and improved fireproofing.
New design techniques to enhance security and prevent progressive collapse will be instituted in skyscrapers, such as the 55-story New York Times Building.
Tomasetti says high-rises are "here to stay in urban environments," but they will increasingly be mixed-use projects, which offer opportunities for materials suppliers and manufacturers. Driven by security concerns, office and residential buildings are using combinations of steel and concrete in their construction, he says. World Trade Center 7 is an example. Structures, such as the 55-story New York Times Building, which is due to begin construction next year, represent successful attempts to integrate improved fire protection measures and methods aimed at preventing progressive collapse.
In the end, a need for ever-closer collaboration between Building Team members will be required, firms say. "We're seeing the integration of design and delivery — closer collaboration of all involved in the transfer of knowledge," says Durrant's Mills.