Improved credit will boost construction, reviving revenue in the latter half of the next five years
Los Angeles, CA (PRWEB) April 07, 2012
The Architects industry derives the bulk of its revenue from non-residential building design. Only a small share of revenue is derived from contracts in the housing construction market; however, many small, regionally based contractors rely on the residential real estate market. Revenue is generated from fee-based contracts from preplanning and design services for construction and building projects. In the five years to 2012, IBISWorld estimates that industry revenue will decrease 2.6% annually to $42.4 billion. Industry growth slowed during the recession due to a deteriorating construction market and a decline in the number of building projects being planned. Further, business bankruptcies and pre-recession overbuilding caused an oversupply of commercial and industrial real estate, IBISWorld industry analyst Kevin Culbert says. The residential real estate market has also contracted dramatically, with the number of housing starts plummeting during the last five years. Revenue is expected to increase 4.0% in 2012 due to marginal improvements in downstream construction markets. Profit margins are expected to increase in 2012, but will remain below prerecession levels. To maintain margins, many large firms have taken cost-cutting measures, such as laying off workers and cutting wages.
About half of the Architects industry’s establishments are sole proprietors or partnerships that do not have any employees; however, these sole proprietors generate less than a tenth of the industry’s revenue. Small players were particularly hurt by the downturn because of their reliance on the residential real estate market, Culbert said. Further, they have fewer variable costs to cut than their big-name counterparts. Many of these small operators left the industry during the recession. Over the next five years, the industry will benefit from improvement in downstream industries. The volume of residential and non-residential construction projects will increase as access to credit becomes more readily available for clients. While revenue is projected to grow in the five years to 2017, it will not surpass the industry's 2008 peak until 2015. Profit margins are also expected to rise during the next five years, as more projects are put into firms' pipelines.
This industry is characterized by many small-scale consultants, often individual proprietors and partners, which operate in narrow geographic markets. The industry's low level of concentration means that no firm holds a dominant position in the market. IBISWorld estimates that the four largest players account for only a small percent of annual industry revenue. For more information, visit IBISWorld’s Architects report in the US industry page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
Architects plan and design residential, institutional, leisure, commercial and industrial buildings and structures. They accomplish this by applying their knowledge of design, construction procedures, zoning regulations, building codes and building materials. This industry also provides drafting services, which includes drawing detailed layouts, plans and illustrations of buildings, structures and systems.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.