Archive for August, 2011

IPD, SB1953 and Other Acronyms Driving the California Health Care Market

Friday, August 19th, 2011

Just finished a wide-ranging interview with Bob Mitsch, vice president of facility planning and development for Sutter Health. Bob discussed his organization’s experiences with and commitment to integrated project delivery (IPD), the innovative contracting and project delivery method that Sutter is often credited with creating. He also spoke about the outlook for the health care sector as it pertains to the design and construction industry, as well as the attributes he looks for in an architecture, engineering or contracting firm.

Bob’s interview, along with much more on the health care market, AEC industry trends, and the outlook for the California design and construction market will be documented in The 2011-2012 AEC Market Guide to California.

Is China Over for California (and U.S.) AEC Firms?

Tuesday, August 16th, 2011

One of the first interviews for The 2011-2012 AEC Market Guide to California was with a project manager for one of the largest OPM (Owners’ Project Manager) firms in the state. In discussing the current condition of the California AEC industry, he said with a certain resignation, “Anyway, the only firms making money are the ones working in China.”

An exaggeration, perhaps, but there’s a seed of truth as well. In January, The New York Times published an article under the headline “China Boom Benefiting Smaller U.S. Architecture Firms.” It described how a 17-person Seattle architecture firm – Stuart Silk Architects – landed a dream project in China. The client chose Silk’s firm primarily because a representative liked a home that the firm designed in Palm Springs. The Chinese developer quickly hired Silk to design three villas in a new community with properties selling for the equivalent of $7.5-million to $15-million (U.S. dollars). The three homes soon became nine.

The Times wrote:

Mr. Silk’s 17-person firm is among scores of small to midsize architectural practices across the United States that are enjoying a startling boom in Chinese projects — whether in spec mansions for sudden multimillionaires or quarter-mile-high skyscrapers. Although a handful of big firms, like Skidmore, Owings & Merrill of Chicago and HOK of St. Louis, have extended global tentacles for generations, it has been only in the last half-dozen years that Chinese projects have gushed down to their smaller brethren.

These firms are grateful for the commissions, and not only for the obvious reason — that the Chinese work has helped fill the void left by a listless American economy. More intriguing, the architects say, is that Chinese developers and even government agencies are proving to be better clients than their American counterparts. They say the Chinese are more ambitious, more adventurous and even more willing to spend the money necessary to realize the designs. This thrills the architects, who have artistic undercurrents that often struggle to find an outlet.

Smaller West Coast firms were also the focus of an article published a month later by the online news resource DailyFinance. Entitled “China Beckons West Coast Architecture and Building Firms,” the article notes that West Coast firms of all sizes and types are positioning themselves as “international experts” to win work in China.

China’s construction growth, fed by a thriving economy and a massive population movement from rural to urban areas, will dwarf that of the U.S. over the next 10 years. This should give building companies with a West Coast presence a chance to offset the effects of sluggish domestic demand by hawking their expertise overseas.

China’s residential and commercial building stock will surge 61% between 2010 and 2020, compared to a 7% growth rate in North America and an 8% increase in Western Europe, Pike Research said in a report.

With the success that U.S. firms are having in China, it’s not surprising that competition is increasing from fellow Western firms. Andrew Nathaniel Mayer, an American architect living and working in China, blogged of the Times story, “The New York Times finally caught up to what savvy architecture firms in the U.S. have known for at least the past decade: there is a lot of work to be had in China.”

Mayer’s excellent resource on Chinese real estate and construction is China Urban Development Blog. In his piece about the Times article, he adds:

…yet the NYT piece glosses over some of the difficulties U.S. architecture offices face when seeking work in China, especially if they do not already have a presence in the country or some other kind of local connection. Sure enough, just last year (and previously mentioned on this blog), some American architects found themselves caught up in scams related to bogus projects in China, perhaps blinded by the hype promoting the country as an architectural free-for-all.

In an e-mail interview for The 2011-2012 AEC Market Guide to California, Mayer said that small firms, despite their relative success recently, are still at a competitive disadvantage compared with their larger peers when pursuing work in China. He also sees the market tightening for U.S. firms, though not disappearing altogether, as he wrote in the e-mail message:

When it comes to western or American AEC firms working in China, I would have to say that the larger corporate firms have an edge up in entering the market due to their resources and reputation. Chinese firms are getting smarter now and moving up the value chain quickly, so I foresee less need for ‘Western expertise’ in the future.

That being said, China is still open to qualified companies, provided those firms play by China’s rules and partner up with local joint venture companies. No part of China is off limits to western firm involvement, but the interior parts of the country are the areas booming at the moment.

“International Opportunity” is one of the trends identified and detailed in The 2011-2012 AEC Market Guide to California, to be published by The JAGG Group. The Guide offers suggestions for how firms can break into or increase their success in international markets, as well offering information on the countries and regions most likely to provide the greatest opportunities for California AEC firms in the coming years.

For more on this subject, and many others  click on the “Buy Now” tab on the www.aecinsight.com home page and order your copy of The 2011-2012 AEC Market Guide to California. The book will be available in late August.

Oakland Developer Tagami Dishes on AEC Industry, Market Outlook

Monday, August 15th, 2011

Phil Tagami is Managing General Partner of the California Capital Group, the company working on redeveloping a 135-acre parcel on the old Oakland Army Base Property. He is also a prominent figure in California real estate and politics, and when he talks, he does so with passion and frequent bursts of unfiltered candor.

In a 30-minute interview for the soon-to-be-published research report The 2011-2012 AEC Market Guide to California, Tagami offered his view on the Northern California construction and real estate market; the attributes he looks for in architects, engineers and contractors; the “erosion of trust” that is damaging the real estate profession; and several other issues important to the AEC industry.

Here’s an excerpt from the interview:

“With architects, I’m looking for gray hair,” he says. “I want the person who sells the job to do the job. We punish architects who replace the senior guys with the diaper squad because we’ve already explained what we want, now we have to retrain others who haven’t done the upfront work. We don’t have that with engineers as much as with architects. We’re seeing a lot of salesmanship these days. We don’t want to talk with a salesman; we want to talk with the technical people.”

The 2011-2012 AEC Market Guide to California is available for sale at the reduced pre-publication price of $199 (plus shipping) by following the “buy now” link on the AEC Insight home page. After 8/19/11, the price goes up to $299 for good.

This comprehensive research report includes a look at the top industry trends in California, as well as a summary and forecast for the major market sectors served by the AEC industry. The book ships in late August.

Strategist’s inside view: What public agencies want in consulting firms

Friday, August 12th, 2011

John Withers is a consultant with public affairs consulting firm California Strategies, LLC (“CalStrat”), but he also is a long-standing board member on public agencies in Southern California. In an interview for the upcoming market research report The 2011-2012 AEC Market Guide to California, Withers offers valuable insight into what public agencies look for in their consultants.

“I sit on the board of several public agencies – water districts, sanitation districts – and in 24 years I’ve seen every pitch known to man,” says Withers, who focuses on water resource management, regulatory issues, land use and development, and infrastructure for CalStrat. “When I sit down and consider a consultant, in the simplest terms I’m analyzing three things.

“First, do they have equivalent project experience? Where have they done this kind of project before successfully?

“Second, I look at the resumes of the key people who we would interface with on a day-to-day basis. If there’s a problem, who is going to take care of it and will they be able to take care of it.

“And their technical approach. I want them to show that they’re already on the job, thinking about it. What are the opportunities and constraints? What can they do to add value? Are they showing us any innovative or alternative approaches?”

While most good AEC professionals know that these are three critical aspects of the process, how many actually deliver a strong performance in these areas? How many junior folks in our firms truly grasp their importance? What better way to drive the point home than to hear it straight from the source?

With public-sector work, Withers says that he’s instructing his clients in the design and construction industries to make sure the funding for the projects they’re pursuing have a solid footing. “For public-dollar projects, the key concept is having a dedicated revenue stream, something where no one can get their hands on the money,” he says. “You want projects with dollars that are earmarked and directed for a particular purpose, not something from the [general fund]. Water/wastewater projects tend to be very stable now; they usually have a steady, dedicated funding source.”

Withers adds that he’s never seen the market so fragmented in his many years in the business. “If you ask how the state of California is doing, you have to drill way down and look at it on a project-by-project and product-by-product basis. It’s a very uneven marketplace.”

Withers offers more of his perspective in various sections of The 2011-2012 AEC Market Guide to California, which is being published by The JAGG Group and due to ship in late August.  

 

California Market Trends from The 2011-2012 AEC Market Guide to California

Wednesday, August 10th, 2011

For better or worse, California tends to lead the nation in nearly every fad, fashion and trend. This is true for our culture, but it is also true for our industry. With this in mind, The 2011-2012 AEC Market Guide to California begins with a look at some of the top trends in the California design and construction industry and among AEC firms doing business in the state. Here’s a glimpse at three of the trends analyzed in the book.

Integrated Project Delivery (IPD)

California is the birthplace of Integrated Project Delivery (IPD) in the U.S., but other than a few projects from devotees of the approach, it hasn’t really taken off here (or elsewhere in the country, for that matter).  What’s the true potential of this innovative approach to project delivery in California? We speak with owners who have used IPD and owners who have considered it and chosen a more traditional approach, providing you with first-hand advice and a better understanding of how IPD may or may not affect your firm and the projects you do.

Public-Private Partnerships (P3s)

Public-private partnership (P3) advocates are quick to point out that the practice has been a project delivery tool for centuries across the country and the globe. This may be true, but P3s often require owners, designers, contractors and everyone else on the project team to hold a different mindset and take a different approach in carrying out their roles on the project. P3 supporters also argue that these cooperative arrangements are a creative way to finance and successfully complete projects that might otherwise be delayed or abandoned, and that they will be a growing piece of the AEC landscape in the coming years. We research P3 projects and interview stakeholders to determine the outlook for P3s in California, as well as the most promising market sectors for this delivery system and what AEC firms can do to prepare for changes that P3s may potentially bring to their business.

Social Media Marketing

Social media marketing is a recent phenomenon, but one that is accepted and frequently applied in many business areas. For the AEC industry, however, the move toward social media marketing has been slow. This may be with good reason – if the audience for an AEC firm isn’t Tweeting or conversing via LinkedIn groups, why should that firm waste time with these new media? Or has the industry finally reached the point that Twitter, LinkedIn, Facebook and possibly even Google+ are as necessary an AEC firm marketing tool as a web site (or a phone number!)? Given the state’s status as the technological leader in the U.S., social media marketing is a growing factor in the California AEC market. In this section, we detail the who, why and how of social media marketing for AEC firms, and offer suggestions for getting into the social media game or ramping up your existing efforts. We also look at some business applications of social media that go beyond marketing and PR.

These are three of the topics addressed in-depth in The 2011-2012 Market Guide to California, published by The JAGG Group. You’ll also read about the potential uses of cloud computing, innovative project financing mechanisms, legislative issues affecting the industry and other trends in the California AEC markets.

This comprehensive research report also provides AEC firms with valuable strategic business planning guidance, including the short- and long-term outlook for major market sectors; information on the most prominent owners, projects and competitors; key resources and links, and much more. Satisfaction is guaranteed. The book will be available in late August.

Northern California Projects Moving Again

Tuesday, August 2nd, 2011

Here’s what the Silicon Valley/San Jose Business Journal had to say last week about the reawakening of some major Northern California development projects that have been in limbo for the past couple of years:

Silicon Valley construction activity, largely stalled during the recession, is revving up once again.

Dirt is moving across the Bay Area on multimillion-dollar projects paused during the downturn. The work is evident in a number of locations, including the Palo Alto’s Alma Plaza, San Jose’s Fruitdale Station, Mountain View’s San Antonio Center, and a Los Gatos mixed-use project on the former Swanson Ford site.

The trend is a positive sign for an industry that has struggled with an unemployment rate hovering around 30 percent for the past two years.

The Journal also listed some of the major projects underway in San Jose, and the top five provide insight into some of the strongest vertical construction markets in the shorter term. Of the five, two are multifamily residential not-for-sale, including the high-end Levare townhouse-style rental properties being developed by Federal Realty Investment Trust. One is an office complex (America Center from Legacy Partners), one is the Belovida at Newbury Park senior housing project from The Core Companies, and one is a health care project (Phase 2 of the Regional Medical Center of San Jose from HCA).