Post-Pandemic Trends for Architecture Firms | SVA CPA

As we move forward, the trends for architecture firms will be heavily influenced by post-pandemic economic factors. Projects may have been put on hold in 2020 due to economic uncertainty.

Now is the time to look at innovative ideas and trends to help architecture firms adapt in 2021.

According to IBISWorld (a worldwide firm specializing in industry research), here are the key trends for architecture firms in the U.S.

Key Architecture Trends

• Due to poor business sentiment, uncertainty, and lack of capital, nonresidential construction is expected to be depressed.
• Nonresidential construction has declined, contributing to industry revenue declines in 2019 and 2020.
• Client demand for LEED-certified buildings has increased, offering an additional source of revenue.
• New companies and firms are expected to enter the industry.
• Residential construction is forecasted to be one of the fastest-growing construction segments.
• The savings offered by green designs will likely lead to increased prices for services.
• The construction market has been the principal driver for revenue growth during the period.

COVID-19 Impact

Nonresidential construction has been affected by the pandemic as businesses get back on their feet. The need for office space could be permanently changed as employers embrace a remote workforce.

This is offset by a surge in residential construction which is driven by low-interest rates and consumer demand for different living spaces based on the last year of remote working and stay-at-home directives.

The high demand for housing and the low inventory will expand the need for architecture services as the construction industry responds to the housing market.

Here are four areas to focus your energies in 2021:

1. Engage Your Clients Virtually

One of the most significant changes in business models was a quick adaptation of technology necessitated by the pandemic. This trend is likely here to stay. The benefits of well-planned, professional virtual meetings will outweigh the need for in-person meetings. If you haven't already, invest in the technology you need to showcase your firm's abilities.

• Use drone filming and photography to provide updates on the project
• Install webcams that allow clients direct access to the project, eliminating the need for site visits
• Upgrade and enhance your virtual meeting technology to deliver the best client experience
• Create dedicated websites by project that include the project's plans and status updates
• Consider the impact of social media with a dedicated project page to keep all stakeholders informed and involved

2. Proactively Plan

Cities are facing revenue shortfalls and budgets for capital projects will be reduced. This will require a proactive approach to justifying future projects. With potential government funding on infrastructure projects in the future, focus your efforts on projects that may be funded soon.

• Be proactive in reaching out to your community leaders and developers
• Design innovative yet affordable options that will differentiate your firm
• Incorporate sustainable practices to reduce climate-related hazards such as flooding potential
• Focus on reducing ongoing maintenance costs in projects to give them long-term affordability
• Plan – but not too far ahead. With economic uncertainty, projects that were typically planned 10 years ahead are facing more unknowns. Focus on the next 2-5 years to allow budget spending to rebound post-pandemic.

3. Impact of Increased Health Awareness

With sanitation a huge focus in 2020, it is likely some of that trend will carry over into the future. Building designs should include increased ventilation and materials that stand up to increased cleaning. A health-centric approach of more distance and separation options, rather than an all-open concept, will transcend into the future.

There will be more focus on occupant comfort and safety in the years ahead. This will be true for both residential and commercial projects. The open-cubicle environment made things difficult when employers needed to provide social-distancing options. Now clear protection shields have been installed in many office spaces and the architecture industry will need to adapt to this changing trend to create collaborative, yet separate, spaces.

4. Review Your Profitability Picture

With a focus on bringing in new business, it's easy to forget about your firm's big-picture profitability. In firms where shareholders are focused on billing and customer service, it's imperative they have a relationship with an accounting firm that helps them with the behind-the-scenes financial picture. Make this the year you delve into things such as:

• Review How Your Entity is Structured - The financial, legal, and operational implications of your entity structure may have changed since it was originally selected, especially in light of updated tax legislation and the Qualified Business Income (QBI) deduction.
• Look at Your Buy vs. Lease Strategy - Capital needs, accounting treatment, and the useful life of an asset are all factors that should be considered. Bonus depreciation now applies to both new and used items and you can take 100% bonus depreciation on qualifying equipment through 2022. Is it time to invest in your firm?
• Align Your Executive Compensation to the Objectives of the Business - Have you been using the same executive compensation model for many years? Maybe it's time to review and look at incentives that meet and balance the firm's objectives for the future.
• Take a Critical Look at Your Financial Picture - Do you have financial reporting systems that show on-demand project performance? Are your reports accurately aligned to what you need? A review of your financials by a trusted advisor will give you a fresh perspective on what you are reporting and ways to improve your bottom line.

Take the time to assess where your business is now and where you want it to be in the future.

Trends change. Economic factors will continue to affect your business. Tax and legislative updates will continue to be rolled out with the new presidential platform. Stay informed and stay current by aligning yourself with advisors who understand your shareholders, business goals, and plans for the future.

SVA Can Help

SVA understands your business model and we have the experience to give you a fresh look at your firm. Contact us for a complimentary discovery meeting and let's discuss how we can work together.