2005 Top Design Firms
Midwest Design Firms Looking at (Far) East

by Elaine Schmidt

The annual Midwest Construction survey of design firms in Illinois, Indiana, eastern Missouri and Wisconsin found Midwestern design firms keeping pace with an ever-changing marketplace that includes emerging overseas markets as well as domestic health care, education, infrastructure, industrial, corporate, retail and housing projects.

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China is the world's biggest emerging design and construction market. It's no news that design firms on the coasts have been eying Chinese contracts, but Midwestern firms have not been left out.

"Whether you are on the East Coast, West Coast or in the Midwest, you're going to fly over the North Pole to get to China, so it's really not that different geographically," said John Syvertsen, president of the Chicago-based OWP/P Architects.

Syvertsen said he had heard repeatedly that it takes about two years to get established in China.

"We thought we would be faster but are pretty much proving the theory," he said. In addition to the obvious complications of language and logistics, he said that fitting into the Chinese way of doing business is the real challenge.

"Relationships are the foundation for work in China," he added. "Yet it is difficult to know when a relationship is truly established. You may think you have something figured out only to find out that you are missing information or things have changed."

He said he thinks health care and education construction will be the areas in which the Chinese particularly seek out foreign expertise.

Other Midwestern firms are also in various stages of studying/entering the Asian and other overseas markets.

Michael Kaufman, principal of the Chicago-based Lohan Caprile Goettsch Architects Inc., said his firm is focusing on China, India and Korea. John Patelski, president of the Chicago-based A. Epstein & Sons International Inc., said his firm currently has two offices in China.

On the Home Front

Midwestern firms are generally seeing backlogs at about the same levels as last year, without any wild swings up or down.

Hiring throughout Midwestern firms has been strategic. Although hires are ranging from promising interns and young architects with just a few years experience to specialists picked from other firms, most reported searching for people with specific areas of expertise to fill well-defined positions.

"What we hear on the street is that finding jobs isn't the problem," said Kyle St. Peter, an executive with the St. Louis-based Hellmuth, Obata & Kassabaum. "It's finding the people who can move in and get going relatively quickly."

Finding those people is leading firms to everything from posting job announcements on the Internet to word-of-mouth announcements. College fairs and internship programs are still in use as are incentives to lure experienced individuals from other firms.

"We do as much through networking as anything else - people who know people in the industry," A. Epstein's Patelski said.

The Markets

Design firms throughout the Midwest cite strength in all sectors of health care and higher education.

"Health care is a big provider for us and it doesn't seem to be waning," St. Peter said.

"The baby boomers are heading toward their golden years."

Although public funding has been tight, particularly in the wake of Sept. 11, some public projects are going forward, from schools to courthouses/jails, as well as a number of private schools. The hospitality market has provided some work, and retail projects are reappearing.

Some areas are seeing large infrastructure projects, such as the replacement of Milwaukee's Marquette Interchange at the juncture of Interstate 94 and Interstate 43, and bridges on the Ohio River.

Corporate interiors remain a strong and noncyclical market, but corporate construction remains sluggish, with several projects sitting on back burners as developers search for the key big tenants to push projects forward.

Urban housing has become a strong market in cities that saw little activity there just a few years ago.

William Browne Jr., president of Indianapolis-based Ratio Architects Inc., said, "The urban housing market is really strong. We are seeing a lot of communities starting to embrace their downtown areas."

Browne's firm has also had success in the cultural market, creating museums in Indianapolis.

Going Green

Watching the Economy

Low interest rates have fueled some of the current work as have several years of pent-up demand in some sectors.

"There is still stiff competition in some areas," Syvertsen said. "In general competition is tough, and it places a greater challenge on the efficiency of our work so that profitability is where it needs to be."

St. Peter agreed, citing corporate interiors as a particularly competitive area.

Data from McGraw-Hill Construction, publisher of Midwest Construction, show some softness in the Midwest market.

Chicago is the only city with an increase in starts in the first half of 2005 over the comparable period in 2004. The Midwest metropolis went up 4.5 percent, to $9.6 billion.

St. Louis saw a 13.3 percent drop, to $2.5 billion; Indianapolis recorded a 13.1 percent falloff, to $2.3 billion; and Milwaukee had a 3.5 percent decline, to $1.2 billion.

Looking Ahead

Despite these middling figures, the view of the coming year throughout the Midwest seems to be one of stability.

"I see the market as being relatively steady," Kaufman said. "I don't see a large slowdown coming, but I also don't see a big increase."

The London bombings in July brought terrorist threats to the forefront again, and both Syvertsen and Browne said, barring something unforeseen, the market looks good for the coming year.

Patelski added that just as steel prices and concrete shortages were issues that delayed project starts in the recent past, rising oil prices seem to be dampening the market today.

Midwest City Starts (first half only; in billions)
	YTD 2004	YTD 2005	% Ch., 05/04
Chicago	$9.2	$9.6	+3.5%
Indianapolis	$2.7	$2.3	-13.1%
Milwaukee	$1.2	$1.15	-3.5%
St. Louis	$2.9	$2.6	-13.3%
Source: McGraw-Hill Construction

Chicago is the only Midwest city to see an increase in construction starts in first-half 2005.

Useful Sources

Several Midwest affiliations of the American Institute of Architects provide designers and engineers an opportunity for networking and learning. They include: