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Room-Temperature Markets...They Will Have To Do in ‘09 - MARK GOODALE Because of the global economy’s historic nose-dive, there is no such thing as a “hot market” right now. As A/E and environmental leaders glass the business landscape in search for red-hot sectors to pursue, they are finding that somewhere between “tepid” and “luke-warm” is the best that’s out there, at least in the short-term. Few, if any, market sectors traditionally served by the A/E and environmental consulting industry are expected to grow in 2009. Even the strongest of markets, such as healthcare and higher education, have had their armor dented, if not pierced. After an 11% increase in healthcare construction in 2008, the expectation for 2009 is a 2.6% drop, according to McGraw Hill. Healthcare design firms that earned record profits in 2008 say there is no doubt that the economic slowdown will impact them in 2009. The higher education market is taking its lumps, too. Dwindling funds for public colleges and endowment shortages for private institutions are significantly reducing higher-ed facility design and construction budgets. Even the most well-endowed schools in the nation, such as Harvard and Yale, have put construction plans on hold until the skies brighten. On the West Coast, California’s public colleges and universities have frozen all state and bond-funded facility projects, and Stanford University has put a halt to over $1 billion in construction projects. Going from bad to worse, design firms around the country report that private development is in shambles. Among the hardest hit states is Florida. A/E firms in the region report that private development is either on life-support or has flat-lined completely. The A/E industry has been awaiting the arrival of the stimulus package with bated breath, especially those firms that serve infrastructure- related sectors. But while construction firms stand to benefit from the money injection, it remains unclear as to how much opportunity will flow to A/E and environmental firms, and whether the stimulus will be large enough to make a serious impact. Amid the doom and gloom, however, are emerging market trends and niches that could provide short- and long-term growth opportunities for A/E and environmental firms. Here are just a few examples: Healthcare Interiors. One growing trend in the healthcare field is “inside-out design”. According to Hal Macomber of Lean Project Consulting, Inc., inside-out-design is the result of focusing on a healthcare client’s value streams. He says, “Figure out how your client generates revenue. Then organize the facility so that you don’t detract from their ability to make money or put anything in place that doesn’t help them make money—as you might suspect, healthcare systems are very interested in that approach.” Instead of programming of all the space and going directly to exterior design, inside-out gets interior designers and equipment planners involved early in the process. “You need to design the processes first and do it with care or you are going to end up with very expensive space,” adds Macomber. State College Dormitories. One potential growth area in the higher-ed sector is state college dormitories. According to the US census, enrollment in colleges and universities will increase 1.4% annually until 2016. In particular, state schools around the country, already strapped for student housing, will see a spike in applications and enrollments as the economy continues to stumble. Parents in general aren’t happy that juniors move off campus, but in reality, any state college would be lucky if it could house its sophomores on campus. The challenge is finishing student housing projects in the four months school is out. Colleges would line up to sign up if they could be guaranteed that by late August new student housing would be move-in ready. Design-Build Road & Bridge. According to the The House Appropriations Committee and the House Ways and Means Committee, the stimulus package will provide an initial $30 billion boost for road and bridge projects. Under this program, states will have 120 days to get each project under contract and 180 days to obligate the money and start each project. As a result, alternative project delivery methods are getting increasingly closer looks. Design-build, now a legitimate option for the vast majority of state DOTs, will likely be put in play more and more as project schedules get tighter and funding gets stretched. Some of the more active design-build states include Arizona, Florida, Georgia, Pennsylvania, and Texas. Picking through the debris of today’s economy for upside can be disheartening—but new opportunities are taking shape. Invest now in recognizing them and putting the necessary talent in position to take advantage.
Tom Lawson of Borton-Lawson, a mid-sized multi-disciplinary A/E firm headquartered in Wilkes-Barre, PA, recently worked his existing relationships with his state’s senatorial staff to obtain an audience with Pennsylvania Senators Specter and Casey. Tom, along with another consulting firm representative and two contractors from central Pennsylvania, were invited to Washington D.C. to present the case of PA firms who are eager to work and hire when stimulus funding is released. Senator Specter, who was just named to the Senate Appropriations Committee, commented that he was happy to meet with “the people who get the work done” and that he’d make sure Congress knew that Pennsylvania businesses were ready and able. Merrick also develops and maintains critical relationships such as Strategic Teaming Agreements with 15 to 20 local contractors. These arrangements may help Merrick to absorb some of the design-build “shovel-ready” work that comes down through the stimulus plan. As a final approach to positing the firm for the stimulus plan, Merrick firm leaders are purposely reaching out to existing Public Works clients to make sure they’re aware that Merrick’s capabilities are at the ready. Parson Brinkerhoff, like Merrick, has taken a client awareness approach to positioning themselves for the stimulus package. They’ve added a section on their website dedicated to the plan which centralizes relevant reports and documents, includes a state-by-state summary of agency responses, chronicles the latest news from Washington regarding the stimulus, and lists detailed biographies of PB staff industry leaders. In addition, the website details three service options PB has at the ready to assist clients in capitalizing on the stimulus plan, including project acceleration, business accountability and enhancement, and accountability and effectiveness. While the economic stimulus plan may not turn out to be a panacea for the entire A/E industry, many firms should still benefit from it. So get educated about where the money will flow and put your firm in a position to win more work.
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