After a pandemic-related delay in 2020, the $420-million Wisconsin Center expansion in Milwaukee broke ground in October with representatives of design team TVS and Eppstein Uhen on hand.
Photo courtesy of the Wisconsin Economic Development Corp.
In 2021, ENR Midwest’s 122 Top Design firms delivered $6.97 billion in total revenue. That’s up from the $6.54 billion reported by 110 firms in the prior year, but the relatively modest increase doesn’t keep pace with the pace of pre-pandemic year-to-year gains.
As Midwest design firms see costs simultaneously rising, many are hoping for a rebound to stable markets with none of the project pauses or cancellations that plagued 2020.
Design firms across Iowa, Illinois, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, Ohio and Wisconsin were a model of consistency over the last year, with the region’s major players remaining virtually unchanged on the 2022 ranking. Burns & McDonnell, AECOM, HDR, HNTB, Stantec, WSP, Terracon, Arcadis, Kimley-Horn and American Structurepoint all boasted strong revenue years in 2021. ENR Midwest’s 2022 Design Firm of the Year Burns & McDonnell blew past the $600-million revenue mark, the first firm to reach such heights on the Midwest ranking, and AECOM improved from $548 million in 2020 to $583 million in 2021. Former top 10 firms EXP and Ghafari Associates still charted well near the $100-million mark, but after the top tier, the drop becomes precipitous.
There were nine firms with revenue between $65 million and $90 million in 2020. In 2021, there were only four. Delayed projects and cancellations plagued firms in the middle and lower rankings and hampered their growth potential. But in the first quarter of 2021, major project restarts by the Wisconsin Center in Milwaukee and 1000M in Chicago bring hope that the market uncertainty that COVID-19 brought with it is finally subsiding.
Many design firms that did not report an investment in cloud collaboration consistently ranked lower than the firms at the top who seamlessly switched to work-from-home models over the last two years.
The power and petroleum sectors had some of the strongest numbers in 2021, and clients are still investing in renewable energy, whether in the form of solar or wind farms or new transmission infrastructure.
The U.S. Dept. of Labor’s Consumer Price Index continued to increase in March, rising by 1.2% for the month and 8.5% from one year ago. The monthly increase is the largest in nearly two decades and was primarily driven by higher energy prices and continued increases in the price of food and groceries for consumers.
The $1.2-billion federal Infrastructure Investment and Jobs Act promises funding for public works that transportation, water and other civil engineers will be needed to deliver design services for. The infrastructure bill signed into law by President Biden also promises funding for markets such as renewable energy infrastructure.
Demand for design services remains high, according to the American Institute of Architects’ Architecture Billings Index, which registered a score of 58 for the month. Any score above 50 indicates an increase in architecture billings, which reflect a roughly one-year lead time between billings and construction. The ABI for Midwest design firms was 56.2.
“The spike in firm billings in March may reflect a desire to beat the continued interest rate hikes expected in the coming months,” said AIA chief economist Kermit Baker in a statement. “However, since project backlogs at architecture firms have reached seven months, a new all-time high, it appears that firms are having a difficult time keeping up with this uptick in demand for design services.”
An Associated General Contractors of America (AGC) survey found in 2021 that 75% of engineers and contractors indicated project delays due to longer lead times or shortage of materials. Further, 57% reported delivery delays, indicating that the industry has difficulty predicting when materials would arrive. A secondary impact, according to AGC, has been sharply increased costs that accelerated over the first seven months of 2021.
Design firms also face a changing market as company executives begin to decide if going back to an office is best for their companies or whether to continue hybrid and full-time work-from-home policies. The commercial office sector has a far cloudier future than other building types. The tight labor market is also impacting design firms.
“It is very busy at this time. We recently had a project for a very large health care organization where no contractors bid on the structural package due to their workloads,” an executive from an 18-person architecture firm in the Midwest, specializing in institutional construction, told the AIA in March.
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