For a long time, Manny Gonzalez, a principal at Irvine, Calif.–based architectural firm KTGY, would do various studies for developers, looking at how to maximize density in a wood frame. “It was mostly developers looking at distressed properties and trying to reposition them where the site had been entitled with product that was too expensive to build and/or where units were too large,” he says. “There were quite a few higher-density condos trying to go to on-grade apartments and townhomes looking to go detached.”
But when it came time to build, the developers would back off, saying that land prices were too high or markets were too soft to support new development.
Around the middle of last year, that changed. “Now, people are not only willing to pull the trigger, but they’re asking us how fast we can get it done,” Gonzalez says. “We’re getting pressure to get projects up and going.”
Indeed, KTGY has seen an increase in billings of 25 percent over the past six months. And they’re not alone. The most recent American Institute of Architects (AIA) Architectural Billings Index shows such increases in work across the board. From August 2010 to December 2010, the index rose each month, starting at 46.90 and ending the year at 60.10. Any score above 50 indicates an increase in billings.
Others saw an uptick in mid-summer as well. Mark Humphreys, CEO of Dallas-based Humphreys & Partners Architects, has seen an increase in business since last June. “We’re seeing a 5 percent to 10 percent increase monthly,” he says. “By year’s end, it’s not inconceivable that we’ll be 100 percent above where we were in January.”
Rohit Anand, a principal at the Tyson’s Corner, Va., office of KTGY, may have seen one of the greatest improvements, considering he’s in the hot Washington, D.C., market. His multifamily billings have increased 300 percent over last year. “The density studies converted into projects,” he says. “We’re swamped. It’s unbelievable.”
But even outside the D.C. market, things are picking up. The REITs prefer high-barrier-to-entry coastal markets. Meanwhile, Gonzalez is seeing markets such as Denver, the greater Bay Area, and even Phoenix perk back up. Humphreys sees similar interest in multifamily as a product type across the country. “There is not one hot market,” he says. “It’s like taking a handful of confetti and throwing it across the entire United States.”
Still, the momentum isn’t infinite: The AIA’s index fell to 53.7 in January and a preliminary number of 49.7 (which means there was a slight drop-off) in February, though Gonzalez, Humphreys, and Anand all saw continued strength that month. In fact, Anand started three large-scale projects in January and expects another 30 percent increase in billings this year over last, even if it’s not as explosive as the growth seen in recent months. “I don’t think we’ll see another 300 percent year,” he says.
But considering where things were two years ago, steady increases would make any architect happy.