My residential architecture firm designs, builds and renovates homes for high-earning individuals living in Westchester County, NY, one of the nation’s wealthiest regions. The success of our firm depends on these people having the income and confidence to invest in their properties.
With much effort and perseverance, our boards have been filled with work throughout the recession, mostly with smaller scale projects offering lower overall fees. Since 2008, revenues have decreased each year, with the year 2012 being the most depressed in the decade-long history of our firm.
Yet, we consider ourselves extremely successful. Firms throughout our region have shuttered and the unemployment rate for architects has continued to increase.
During the years before the recession, our project lists were loaded with large-scale residential projects. The historic Hudson Valley is full of old houses in need of renovation or reconstruction and our workload required a full roster of architects, support staff and a well equipped open studio in which to practice. Licensed architects and rent in Westchester County (located about 40 minutes north of mid-town Manhattan) doesn’t come cheap. We worked hard to build a reputation for the highest level of quality and innovative design, and our fees are commensurate with the expectations of our clients.
Many of our clients work locally for large corporations (Pepsico, IBM, etc.) or commute to New York City; bankers, venture capitalists, lawyers, doctors.
Residential architecture is a tough profession. It relies on homeowners having access to large sums of money. Some save a lifetime. Others earn it quickly with high paying salaries and annual bonuses. In order to commit to an architecture project our clients must have enough money left over after paying living expenses, taxes and savings. They must have enough confidence in their own economic situation to proceed with a project costing hundreds of thousands of dollars. If that funding and confidence isn’t present and available, our project list shrinks and our earnings shrink with it.
Here is how my micro-economy works:
- Large corporations employ people at all levels. Some of those people provide services and/or knowledge to the company worthy of a high salary; an amount determined by the marketplace.
- As incentive to stay with the company and not seek employment elsewhere, the company offers benefits and annual bonus payments based on the company’s success and specific performance standards set for each employee.
- Each year, that valuable employee works hard, contributes to the success of the company and earns her salary. If the employee meets specific goals, further benefiting the company, she earns an additional bonus payment as per her agreement with the company.
- After taxes, expenses and required savings, if the employee has enough remaining, she puts it aside and saves for an architecture project; additions and alterations that will improve the function of her home and make it a place better to raise her family.
- With enough saved, she evaluates the current economic conditions and confirms the stability of her employment.
- With enough confidence in her financial situation, she seeks an architect and becomes our client.
So at this point, two conditions must be present for a residential architect to be hired. She must have enough money for the project cost and enough confidence in the economic conditions around her to pull the trigger and proceed with the project.
Money and confidence; without both pieces in place there is no project.
And here is where it gets worse.
If there is no project, there is no revenue for the firm to pay our employees, who then cannot proceed with their own “projects”. We don’t hire consultants (who also have employees). No contractors hired, no subcontractors, no equipment rented, no building materials, no products purchased, no suppliers, no laborers…
Each project benefits dozens (maybe ultimately hundreds) of people. When one project is delayed, the others that do proceed absorb the difference. When dozens are delayed, we have micro-economic meltdown.
My micro-economy is broken.
One or several of the links in the process of hiring an architect is missing. Have salaries been reduced? Bonuses eliminated? Have corporate layoffs caused a lack in confidence? Have new laws, rules and regulations caused corporations to take a defensive strategy of reduced expenses and minimized investment? With a pivotal national election pending, are corporations and employees alike, frozen by an uncertain future?
I don’t know the answer. I am an architect, not an economist.
I do know that our situation will not improve until our clients have the funding needed for their projects and the confidence to proceed.
How is YOUR micro-economy?