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Firms Cope Better in Shifting Markets
April 5, 2011

An expected resurgence in private spending in 2011 means that diversified architecture, engineering, planning and environmental consulting firms will be better poised to benefit from the economic recovery, say economists in a recent issue of The Zweig Letter, ZweigWhite’s weekly management publication.

While many design firms tried to change gears quickly in response to the American Recovery and Reinvestment Act, firms that were able to keep their links to the private market intact during the recession are now better positioned, Kermit Baker, chief economist with the American Institute of Architects, told TZL, and those are likely multidisciplinary, one-stop-shop type firms able to operate in several market types and geographic areas.

“You need to diversify; you need to keep your feet in several markets,” Baker said.

Six months of positive Architecture Billings Index scores show that the private market for design and construction activity is starting to pick up—namely the commercial and industrial sectors. The federal market, however, is heading in the opposite direction—92% of the federal stimulus package has now been allocated.

“Federal spending is at a plateau from which it may drop pretty steeply in the next year,” said Ken Simonson, chief economist with the Associated General Contractors of America.

David Sherrill, president of Sherrill Associates, an Edwardsville, Ill.-based land surveying, engineering and planning firm, echoed Simonson’s forecast. “We have state department of transportation work, which will be drying up at the end of this year,” he said. “I would expect all design firms will take a hit in this sector— at least two to three years.”

Sherrill pointed to activity in the private market as a potential bright spot. “We expect moderate growth in the private sector as long as the financial district stays strong and dollars remain available to stable investors,” he said, while cautioning that he hasn’t seen any evidence of strong growth yet. “I don’t see a boom in the private sector while the public sector realignment takes place. Hang on to your pants. I’m afraid we’re still in for a rough ride for a couple more years while the entire country realigns itself to the country’s debt reality.”

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