After recessionary declines, improved construction markets will revive revenue.
Los Angeles, CA (PRWEB) September 30, 2013
The Architects industry derives the bulk of its revenue from nonresidential building design. Revenue is generated from fee-based contracts from preplanning and design services for construction and building projects. Only a small share of industry revenue is generated from contracts related to housing construction, however, many regionally-based contractors still rely on the residential real estate market. In the five years to 2013, IBISWorld estimates that industry revenue will decrease at an average annual rate of 5.5% to $33.4 billion. According to IBISWorld Industry Analyst Stephen Morea, “Industry growth was dramatically affected by the recession, as it resulted in a deteriorating construction market and a decline in the number of building projects being planned.” Furthermore, business bankruptcies and prerecession overbuilding caused an oversupply of commercial and industrial real estate.
Nevertheless, the construction market has recently shown signs of recovery. As a result, revenue for the Architects industry is expected to increase 4.4% in 2013, as both the value of nonresidential and residential construction is expected to rise strongly, leading to increased building and an increased need for architectural design. In addition, industry profit margins are estimated to account for 6.9% of revenue in 2013, up from a recessionary low of 3.2% in 2010. Still, profit margins remain below 7.2% of revenue from 2008. To maintain margins, many large firms have taken cost-cutting measures, such as laying off workers. Consequently, the number of industry employees has fallen at an estimated annualized 3.5% over the past five years.
During the five years to 2018, industry operators will continue to benefit from improvements in the downstream construction markets. The volume of construction projects will increase as access to credit becomes more readily available to clients. Industry operators will look to offer more value-added and environmentally friendly services as the level of competition grows from one-stop, full-service building and engineering firms.
“This industry is characterized by many small-scale consultants, often individual proprietors and partners, that operate in narrow geographic markets,” says Morea. The fragmented nature of this industry is also evident when comparing the size of enterprises that have employees. During the next five years, industry concentration is not expected to increase as the number of architect firms is expected to increase. While more clients are expected to use larger firms that can provide a wide array of services, the increasing number of industry operators is expected to counteract growth in large companies as the construction market improves.
For more information, visit IBISWorld’s Architects in the US industry report page.
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IBISWorld industry Report Key Topics
Architects plan and design residential, institutional, leisure, commercial and industrial buildings and structures by applying their knowledge of design, construction procedures, zoning regulations, building codes and building materials. The Architects industry also provides drafting services, which includes drawing detailed layouts, plans and illustrations of buildings, structures and systems.
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