Foreign Architecture Firms Flounder in China 1

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Monday, August 17th, 2015
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Easing growth in China’s construction and real estate markets is compelling many foreign architecture firms to trim both staff numbers and salaries.

The ongoing slowdown in China’s economic growth is hitting the country’s domestic architecture market, with many foreign companies now opting to reduce their operations in the Middle Kingdom.

Despite a boom in building projects and property developments since the turn of the decade, fuelled significantly by Beijing’s efforts to prop up the economy amidst trying international conditions, growth in China’s construction and real estate markets is now beginning to ease.

Constructions fell by 16 per cent in the first half compared to the same period last year. While home prices and sales saw a modest uptick in major cities during the second quarter, many developers remain wary about starting work on new projects due to a potential oversupply of both residential and commercial property.

Local governments withdrawing from urban projects, while Xi Jinping’s crackdown on corruption has led to the scuppering of many bonanza vanity projects.

The mood of caution surrounding new projects has compelled many companies, both foreign and domestic, to shelves new projects, as well as retrench workers and trim salaries.

Aedas, one of the world’s largest architecture firms, serves a case in point. The award-winning international architecture practice issued an internal memo to members of its Hong Kong office informing them that pay cuts of between five to 20 per cent would be implemented starting in July.

“Aedas’ workload has reduced and in these challenging times we need to adjust our costs to suit our current workload and the prospects for new work in this difficult market,” read the memo. “This is a very tough decision to make.”

According to the firm 275 members of its 627 strong-team in Hong Kong was subject to salary cuts, while five directors based in the mainland were subject to 10 per cent pay reductions.

The pay cuts followed the retrenchment of 24 members out of Aedas’ 281 workforce in mainland China at the start of the year.

According to Aedas chairman Keith Griffiths the retrenchments and pay cuts are part of efforts to adjust to the slowing pace of urbanisation in China as its economy matures.

The international giants are far from alone when it comes to staff reduction, with many smaller domestic and foreign architecture practices also cutting back their teams in order to deal with a more difficult market.

 

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  1. Steve Ryder

    This is sector-dependent. For example, the aged care/retirement living sector in China is burgeoning as it looks to Australia for experience and inspiration. Economies go in cycles and when you look closer so do particular sectors. Aviation, for example, is another performing reasonably well here. It is important that nobody pushes the panic button just because some practices are forced to cut salaries or reduce staff levels.