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Diversity key to helping local architects ride out market

Daily Journal of Commerce

May 2nd 2008

Although recent data from the American Institute of Architects shows that business has slowed down around the United States, local architects say they are well positioned to cope with a lackluster economy.

"There's definitely a downturn in the market," said George "Bing" Sheldon, a principal with SERA Architects. "We're not as badly hurt as the places where there's real volatility, such as Florida, Nevada and southern California."

The AIA's Billings Index dropped two points in March and fell to its lowest level since the survey began in 1995. The findings are a leading economic indicator that provides an approximately nine- to 12-month glimpse into the future of non-residential construction activity, according AIA.

The AIA reported the March ABI rating dropped to 39.7, following a steep 9-point decline in February. Any score above 50 indicates an increase in billings. The inquiries for new projects score was 48, also the lowest mark for the survey since 1995.

The South posted the highest rating, with 45.3, following by the West and Northeast, both at 38.7, and the Midwest had a 36.9 rating.

"We've seen an 11-point fall-off in the first quarter of the year and the prognosis for commercial construction later this year is not favorable at this point," said AIA chief economist Kermit Baker. "Aside from historically low project demand, all regions are showing very poor business conditions. This is not likely to reverse itself anytime soon."

Local architects such as Sheldon said developers are making adjustments by shifting plans for condos to plans for apartments. Being diversified is the key to riding out the downturn, Sheldon and other architects said.

For SERA, strong sectors continue to be adaptive re-use and hospitality. SERA designed The Nines, a new hotel project on the upper floors of the Meier and Frank Building in downtown Portland. The firm is also designing a renovation of the 147,000-square-foot Oregon Department of Transportation headquarters building in Salem.

"It appears the hotel industry is a more stable environment," he said. "They aren't having quite the same problems that developers of housing are having."

Bob Thompson, a design principal with TVA Architects, said he has seen a downturn in the condo market. His firm designed Park Avenue West, a mixed-use tower in downtown Portland.

That project originally was going to include more condos, Thompson said, but the economic climate forced the mix to shift to mostly office space, with 11 floors of condos.

"We're not doing as many condo towers as we've done in the past," said Thompson. Still, he said his firm is busier than ever working on projects such as the new University of Oregon basketball arena, as well as work for Nike and an office tower and a hotel in China.

Bill Strong, a principal with Mahlum Architects, said his firm's offices in Portland and Seattle are staying busy with health care and education projects.

"Our revenues and billings are on a par with last year and we're humming along fine, actually," said Strong. "As a firm, we have not slowed down. But we believe Oregon is having more issues than Washington."

By that, Strong said he meant that his firm's current educational sector work is funded by bonds that were passed two or more years ago. But he said Oregon voters are concerned about the economy, and he questioned whether they will feel generous enough to fund upcoming capital projects.

"A lot of school districts are deciding not to put bond issues out and wait a year," he said. "The 'R' word (recession) is being thrown around."

Still, Strong said his firm has seen strength in the health care sector. Mahlum is designing a hospital in Issaquah, Wash., and a medical center in Telluride, Colo., and Mahlum has completed a medical center in Newberg.

Jeff Myhre of Myhre Group Architects agreed that the condo market has cooled and the apartment market is taking some of the slack from the condo downturn.

"There's a lot of product on the market now, and it simply takes time for that to be absorbed," said Myhre.
One advantage Portland has over other cities, several architects said, is its reputation for livability.

"Folks are packing up and moving here," said Myhre. "Portland is being fueled by this migration."

People who come to Portland may be unsure about buying a condo, which should help the apartment market, according to Sheldon.

"People who come here sense the condo market might be in turmoil, but they've got to live somewhere," said Sheldon. "We're fortunate to be in Portland, where we're still experiencing a migration."