Architecture . Construction . Engineering . Property

Many Challenges Impacting Architectural Practices

In its Architecture Forensic Report, the Creative Industries Innovation Centre says profit margins of many small to medium sized practices are being squeezed amid growing competition and a commoditisation of architectural services. The Centre adds, however, that opportunities exist to expand overseas and specialise in niche areas and that significant potential for growth remained in the domestic market.

“When the global economy slumps, so does demand for architectural services,” the report says. “Many architectural firms have only just begun to feel the pinch, protected by government stimulus packages in the wake of the Global Financial Crisis.”

“Small- to medium-sized architectural businesses continue to be sandwiched by lean and digitally literate start-ups and by large, financially stronger, interdisciplinary firms, squeezing margins from both sides. Architectural services are further being commoditised as building and construction firms encroach in areas such as project management.”

In its report, the Centre found that:

It said firms needed to better understand the future, generate a compelling sales proposition, better understand cost structures, job costing and credit controls, and replicate the interdisciplinary nature of large firms by creating a network of specialist consultants and subcontractors.

It also encourages practices to look for niche strategies or opportunities for overseas work, with possible examples of the former including heritage and conservation work, sustainable buildings, hospitality, aged care, interior design, surveying and mapping and urban planning and possible destinations associated with the latter including China, Vietnam, Singapore, the Philippines and India.

“Architecture principals need to free themselves from the day-to-day running of the business and allocate time and resources to longer-term thinking, trend forecasting and action,” the report concludes.

“Many architects understand their direct competitors, but not their indirect competitors such as builders, draftsmen and construction firms. It is important to understand the total competitive landscape to better differentiate your business from companies that compete aggressively on cost.”

According to the report, a snapshot of the current state of the architectural services business landscape in Australia is as follows: