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Sunday, Oct 2, 2022

Architecture Industry Bracing for More Bad Years

The recession took a big bite out of Orange County’s architecture industry in the past year.

The 30 largest architecture firms saw an 8.6% drop in local billings from a year earlier to $442 million, according to this week’s Business Journal list.

It’s the first yearly decrease in billings seen by firms on our list in seven years. The drop puts the industry back to where it was about two years ago, in terms of total local billings.

Eight companies reported increases in billings for the 12 months through June, compared with 15 that were up at this time a year ago. Ten companies lost business. Two were flat and 10 were estimates.

Considering the drastic crash of the housing market, the loss could have been worse.

Three years ago, architects here began feeling the effects of the depressed housing market, so companies started looking to schools, hospitals and civic projects for work.

With much of that work completed, architects are hunkering down for a dry spell.

“There’s talk that the market might be improving, but I’m not overly optimistic. Our state has some structural issues that are going to slow down (a recovery),” said Dan Heinfeld, president of Irvine-based LPA Inc., No. 1 on this year’s list.

Tricia Esser, chief executive of KTGY Group Inc., No. 2 on this year’s list, said her Irvine-based firm is starting to see more positives than negatives, although she can’t predict when a complete turnaround will really begin.

“We’re seeing more interest in (urban) infill and transit-oriented design” projects such as those being proposed for the city of Anaheim, Esser said. “Even in a downturn, you can still do creative work and make interesting communities.”

Employment figures took an even more pronounced drop than billings did. The number of licensed architects here fell 19% from a year ago to 408. Only three companies reported that they added to their ranks of architects in the past year.

Total headcount for the 30 companies on the list dropped less dramatically, going down 4.4%, to 2,063 OC-based workers.

That figure’s a bit misleading. The overall year-over-year employment decline would have been closer to 20%, if not for an acquisition-driven gain at No. 4 Pasadena-based Jacobs.

Jacob’s OC headcount jumped from 190 employees a year ago to 525 employees. Only two other companies on this year’s list reported an increase in employee count, and those two companies added a combined four employees.

In late 2007, Jacobs acquired Santa Ana-based Carter & Burgess Inc., long one of the area’s larger architecture firms. This year’s entry for Jacobs includes the acquisition as well as a more accurate counting of employees from Jacobs’ Santa Ana offices and another two in Cypress.

Jacobs posted billings of $33.8 million last year, an 8% drop from a year ago.

The pain seen in the industry last year was more pronounced at the top of the list. None of the top six companies on this year’s list reported growth for the 12 months ended June.

LPA retained the No. 1 spot on this year’s list, despite a 3% drop in billings. The company, which also handles planning, landscape architecture, interior design and engineering work, in addition to architecture, reported $50.6 million in billings.

Recent work for the company includes a new flight projects center at the Jet Propulsion Laboratory in Pasadena. The six-story structural steel building, built by Swinerton Builders, totals about 195,000 square feet and held its grand opening a few weeks ago.

Federal government work, such as the JPL project, is just about the only sector that’s growing right now, Heinfeld said. The problem is everyone is going after the same business, making competition fierce, he said.

Getting a foot in the door with the JPL project “helps us with negotiating with the federal government” for other deals, Heinfeld said.

KTYG Group remained in the No. 2 spot on this year’s list, with an estimated $48 million in billings. The company was long the No. 1 firm on our list during the housing boom but has seen its core work for housing change direction during the downturn.

“Even in Orange County, there’s a lot more density than there used to be. You have to figure out how to build up. There’s not as much sprawl,” Esser said.

The company’s worked on the Pacific City megaproject in Huntington Beach, which has seen construction work delayed during the downturn.

Holding at the No. 3 spot was Irvine-based McLarand Vasquez Emsiek & Partners, which reported $35.7 million in billings. A year ago, the company boosted its international work to increase local billings, with big projects in Russia and China, among other countries.

The global recession was felt by the company in the past 12 months or so, with billings falling about 22%. It was one of seven companies on the list that reported double-digit declines in business.

The largest percentage increase in the list was for the Irvine office of HMC Architects, which posted a nearly 48% jump in billings in the 12 months through June, to $8.3 million. That boosted the company to No. 17 on the list, from No. 26 a year ago. No. 7 Gensler had the largest dollar increase with a $2.8 million bump to $21 million.

Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.

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