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What Does The Impending Downturn Mean for Key Trends in the A/E/C/ Professions?

What Does The Impending Downturn Mean for Key Trends in the A/E/C/ Professions?. Kermit Baker, Chief Economist The American Institute of Architects. Green Building Products Summit October 30, 2008. Key Trends In the A/E/C Professions.

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What Does The Impending Downturn Mean for Key Trends in the A/E/C/ Professions?

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  1. What Does The Impending Downturn Mean for Key Trends in the A/E/C/ Professions? Kermit Baker, Chief Economist The American Institute of Architects Green Building Products Summit October 30, 2008

  2. Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination (e.g. BIM) • Rising costs of construction materials

  3. Larger Firms Account for Large Share of Activity and Growth in Architectural Profession share of total staff and billings in the profession in 2005 at all firms by firm size Source: The American Institute of Architects – The Business of Architecture, 2006.

  4. Opportunities to Open New Markets Top Reason for Recent M&A Activity Most important reason for recent interest in merger and acquisition activity, % of firms AIA Work-on-the-Boards, July 2007

  5. Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination (e.g. BIM) • Rising costs of construction materials

  6. Managing Peak Workloads Principal Reason for Outsourcing Work Offshore Most important reason for outsourcing work for those firms that have ever outsourced work on domestic projects offshore, % of firms AIA Work-on-the-Boards, October 2007

  7. Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination (e.g. BIM) • Rising costs of construction materials

  8. Almost All Firms Work On “Green” Projects; But Share of Projects That are Green Much Lower Share of firms; share of projects Source: AIA Work-on-the Boards Survey; April, 2008

  9. Lifecycle Cost Savings Seen as Key Motivation for Sustainable Construction % of respondents ranking as greatest motivation by businesses Source: AIA Work-on-the-Boards Survey, May 2007

  10. Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination (e.g. BIM) • Rising costs of construction materials

  11. BIM Has Had Strong Levels of Adoption, But Many Have No Plans to Implement Firm’s use of virtual design/ building information modeling, % of firms Source: AIA Work-on-the-Boards Survey, February 2008

  12. Most Firms Believe BIM Will Become the Industry Standard, Although Timetable Varies When will BIM become the industry standard, % of firms Source: AIA Work-on-the-Boards Survey, February 2008

  13. Higher Quality Designs Perceived as Greatest Benefit to Firm of Using BIM % of respondents ranking as greatest benefit Source: AIA Work-on-the-Boards Survey, February 2007

  14. Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination (e.g. BIM) • Rising costs of construction materials

  15. Nonresidential Construction Materials Costs Have Increased Twice as Fast as Overall Inflation in Recent Years Sep. 2008 Source: BLS (CPI, PPI); compiled by AGC Economics Dept.

  16. Outlook for Design Firms and the Construction Industry • International credit markets in most serious condition since the 1930’s. • U.S. economy likely in recession; most international economies also weakening. • Residential market still spiraling downward; nonresidential construction activity just beginning its downslide. • U.S. businesses in construction industry facing more competition (domestic and international), pressure for diversification, unique qualifications, greater efficiencies, and other competitive advantages.

  17. Moving Beyond the Downturn: Prospects for Key Trends In the A/E/C Professions • Industry concentration, consolidation, and integration • Globalization: outsourcing and international opportunities • Demand for sustainable design • Technological investments to increase productivity and promote coordination(e.g. BIM) • Rising costs of construction materials

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