A majority of leading U.S. firms will be exporting design services at new record levels this year. Furthermore, firms are universally bullish about opportunities for U.S. architects abroad as they look out over the next three year horizon. DesignIntelligence has been tracking the service export trends since 1998 and during this time top design firms have exported an annualized increase of 21.2 percent in non-U.S. fees billed. HOK, KPF, RTKL, Arquitectonica, and Cannon Design have seen the greatest increases, ranging from 20.1 percent to 74.3 percent, annualized since 1998.
Back in 1998 the top ranking export firm was HOK whose non-U.S. billings at that time were $58.8 million USD that year. This year the firm projects $240 million which is a staggering increase of $181.2 million over the last nine years. The top five service export firms in 2007 are projected to be HOK, SOM, KPF, Gensler, and RTKL. The combined non-U.S. fees generated by the top five firms will top a half billion dollars.
Based on the 2007 fees, the fastest growing firms (when just considering non-U.S. fees) are HOK, SOM, KPF, Gensler, Arquitectonica, and Cannon Design. Regarding the economic outlook for the next three years, 90 percent of firms report that they are bullish, followed by only ten percent who were neutral, with none of the leading firms bearish as they look ahead at the near term. The top ten areas of export services in ranked order are:
Hospitality, resort, hotel, entertainment design
Large space/mixed use
Commercial/office
Planning and urban design
Transportation/airports
Healthcare
Residential
Higher education
International games/sports
Civic architecture
Firms in our survey are also faring very well on their strategic growth within the United States. Total fees for the top seven firms are estimated to exceed $2.25 billion for 2007:
Gensler
$615,000,000HOK
$591,000,000HKS
$310,000,000Perkins + Will
$300,000,000SOM
$253,000,000NBBJ
$180,000,000Leo A Daly
$145,000,000
Globalization is advancing aided by improvements in information technology, product manufacturing, transportation, pre-fabrication, off-site assembly of complex components, and the ability to work in a 24-7 environment. This essentially means that traditional political borders are no longer a factor in design and construction. Firms have the potential to practice globally and global firms can practice locally. The result is expected to be greatly increased competition and downward pressure on fees, but at the same time, there will be a big premium paid for “branded” firms – those that provide highly specialized services and can convince the market that they have a unique value proposition.
Non-U.S. fee growth is expected to further increase in 2008 with many firms reporting steady backlog gains. Based on our most recent survey for example, NBBJ is forecasting international growth of 17 percent; SOM, Cuningham Group, Callison and RNL are expected to grow by 15 percent; HKS, Inc. by 10 percent; and Gensler and TRO Jung/Brannen by at least 5 percent. Some firms are projecting extreme growth and this is led by Cannon Design at just under 50 percent international growth projected through 2008.
The seven primary concerns faced by the DesignIntelligence Top 30 in 2007 are reported as follows:
The state of the global economy and the stability of the worldwide real estate markets
Mobilization of human resources
Price resistance to professional fees
Timely payments
Competition
China overheating
Attitudes to a more nationalistic agenda with anti- American sentiment
In light of the significant recent changes in the valuation of the U.S. dollar (USD) firms are largely in agreement to write their contracts in U.S. currency. Exceptions to this are few. As the dollar declines, many of the firms have found that they are increasingly competitive against the leading European firms. Writing contracts, agreements, and documents using USD also minimizes the impact of currency fluctuations under contract. However, the currency fluctuations may impact the perceived “value” as well of services provided. Some contracts are dollar based contracts in countries whose currency valuation is dollar linked such as in UAE.
Source: Greenway Group and responding firms. Some of the firms on the list are majority owned by non-U.S. based corporations but these firms are all based within the U.S. Both RTKL (by ARCADIS) and Hillier (by RMJM) were purchased by non-U.S. based professional firms in 2007. This list does not include the E/A, E/C firms, but only pure architectural design A and A/E, A/D organizations.
HOK
$240,000,000SOM
$129,000,000KPF
$77,250,000Gensler
$75,000,000RTKL
$57,500,000WATG
$55,000,000Arquitectonica
$36,000,000NBBJ
$35,000,000Perkins + Will
$34,000,000Cannon Design
$30,000,000Smallwood (SRSS)
$28,000,000HKS
$25,000,000Burt Hill
$24,500,000TVS
$17,000,000Swanke Hayden Connell
$16,000,000Ellerbe Becket
$11,400,000RMJM/Hillier
$11,200,000TRO Jung Brannen
$11,000,000Perkins Eastman
$10,800,000Goettsch Partners
$10,650,000SB Architects
$10,500,000Kaplan McLaughlin Diaz
$10,000,000A. Epstein
$9,500,000Einhorn Yaffee Prescott
$8,000,000PageSoutherlandPage
$5,700,000Mulvanny G2
$5,300,000Sasaki
$5,000,000Leo A Daly
$5,000,000Ghafari
$4,500,000Cuningham
$4,000,000RNL
$4,000,000HLW
$3,800,000
