Sep 24 2007
Woburn-based CPA and business advisory firm DiCicco, Gulman, & Company LLP (DGC), today released its 2007 Architectural Study, a comparative survey of statistics and trends in the New England Architecture industry. The survey results indicate that it is a great time to be an architect in New England with the results showing record firm profits during a period when 2007 backlog levels continue to grow. Key findings include local companies expanding both nationally and internationally. In addition, companies are experiencing a labor shortage in the local area.
"New England architectural firms are in the midst of an unprecedented period of strong demand for services, while at the same time, the increasingly tight labor market continues to present a challenge for most firms," said David Sullivan, partner in charge of the Architecture and Engineering practice at DiCicco, Gulman & Company and author of the study.
"As these competing factors co-exist today however, firms are also looking forward with a wary eye to the current real estate and equity markets, which contain indicators that cause some firms to prepare for a slowdown in the upcoming years. Nevertheless, we continue to see a general increase in firm profits and backlog levels for 2007."
New England firms have been taking advantage of more national and overseas projects. Rapid expansion of developing global economies has created a need for improvements to infrastructure and new commercial development. Areas most commonly in need of improvement included office buildings, hotels, resorts, educational institutions, and landscapes.
Today's marketplace provides firms with many options to compete; technology has made it easier for firms to expand geographically in both the US and internationally. New England firms are increasingly designing more projects internationally, and it is no longer uncommon for a New England firm to have multiple offices in several states in the US. This helps firms increase backlogs while giving them the opportunity to attract quality staff from other geographic areas. We expect this trend to continue into the future.
Key Findings:
- The average firm saw a 7% increase in net fee from the prior year.
- Average profit per direct hour nearly doubled from $6.52 in 2005 to $11.95 in 2006, the highest level of the past five years.
- Firms were very busy in 2006. The average firm's utilization rate increased from 63.7% in 2005 to 64.4% in 2006, the highest level in the past five years. This trend continues in 2007.
- The average direct labor billing multiple increased from 3.03 in 2005 to 3.11 in 2006 and the average billing rate per direct hour jumped from $93.70 in 2005 to $98.45 in 2006
- Overhead costs continued to rise in 2006, most notably in the areas of health care benefits and staff bonuses.
- As the average utilization rate increased, the average breakeven multiple for firms decreased from 2.84 in 2005 to 2.81 in 2006 and the overhead rate per direct hour reflected a similar trend, dropping from the 2005 level of $56.21 to $55.35 in 2006.