Hotels and Office Conversions Are Bright Spots for Architects Amid Slowdown in Business

Architect continued business to slow in December as developers struggle with financing, but conversions in the hospitality, restaurant and office segments are expected to provide a steady source of work for design firms in 2023.

Kyle Reis, CEO of design firm Cooper Carry, told CoStar News that the backlog of projects in those segments is “one of our best … we’ve really ever had,” and the firm has “gotten quite a few new projects started the first few weeks of this year.”

Cooper Carry’s new contracts include the design for a new W Hotel in Orlando, Florida, near Disney World.

The firm also recently began design work on the redevelopment of a 200,000 square-foot former office building at 1101 King St. in Alexandria, Virginia, into apartments and retail.

Reis said his company hasn’t “really seen any slowdown that’s given me any pause or cause for concern,” but an index of billings by architecture firms in December showed a general decline.

The value of architects’ invoices sent to clients in December rated a score of 47.5 on the American Institute of Architects’ monthly billings index. scores below 50 indicate a drop in billings. New design contracts also had an index score of 49.4.

Recession fears and the prospect of continued rate hikes by the Federal Reserve have chilled many development projects, a condition that may persist this year, according to the Mortgage Bankers Association. In another indicator of difficulties in securing project financing, large US banks slowed originations of loans for property acquisitions in recent months, according to CoStar data.

“Architecture firms have modest expectations regarding business conditions this coming year,” Kermit Baker, the AIA’s chief economist, said in a Wednesday news release.

Reis said Cooper Carry the construction of new office buildings has slowed dramatically, but the firm continues to book projects to convert offices into hotels, residences and schools.

In a hopeful sign for architects for 2023 and beyond, the pace of inquiries on new projects increased in December to 52.3 from 52 in November, according to the AIA.

The AIA’s monthly report does not break out billings or revenue by individual firms.

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