AE Industry Changing

October 7, 2005
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ATLANTA — According to PSMJ Resources Inc., the nation's design industry seems to have rebounded from the recession.

The firm's 2005 Financial Performance Survey revealed that the median operating profit for design firms reached 12.3 percent, up from 9.7 percent in the previous year. In addition, gross median revenue grew by 10 percent. Data for the PSMJ survey, which was released in June, came from 185 architectural and engineering companies in the United States and Canada

But even with a brighter financial situation, design shops have another worry that will likely become problematic in a few years and change the way they do business.

In another recent survey, owners of architectural and engineering firms told PSMJ they were having difficulty finding qualified applicants to fill vacated and new positions — a situation that has become even more acute when the industry experiences growth as it did last year.

At the same time, compensation rates have made curing the current circumstance more complex.

"Wages for architects and engineers really aren't keeping up with the demand. Wage escalation for architects and engineers is actually running only slightly above inflation, at about the same rate as wages in the general economy," said David Burstein, director of consulting for PSMJ, from his Atlanta office.

"And the demand for architects and engineers is increasing at a significantly faster rate," he added.

Design firms are aware that fewer architectural and engineering graduates have emerged from the nation's colleges and universities for the past two decades. And although Burstein has found some anecdotal evidence indicating that trend may be reversing, he said the most recent government statistics show the situation hasn't changed.

About 60,000 students earn architecture and engineering degrees in this country every year, while 360,000 and 250,000, respectively, do the same in India and China

In response, Burstein said the A/E industry has taken many measures to keep the work flowing — "everything from unusual recruiting tactics to occasionally offshoring work, although that is still pretty rare," he said.

But Burstein thinks A/E firms will be sending a lot more work offshore in the future, because the pain caused by the current labor scarcity is going to become really acute in five to 10 years when baby boomers start to retire.

"Given the fact that the supply of architects and engineers has been shrinking for 20 years and, all of a sudden, half are going to be gone, it's going to make today's labor shortage look like a picnic," he said.

PSMJ has been serving the architectural, engineering and construction industries for 30 years from its base in Newton, Mass. In addition to surveys, PSMJ conducts more than 200 educational seminars and conferences each year and has published over 150 titles that relate to those fields.

Burstein said sending work overseas is still a work-in-progress for U.S. designers, who have begun to dabble in doing that. So far, the results have been mixed because most haven't figured out yet how to do it efficiently.

"I think they will figure out how to do it because they have to. That is going to be the only source available, because there simply isn't going to be enough people in this country," he said. "We're going to have to go offshore. I don't think there is any question about it."    

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