Exploring The Business of Architecture. CU EMBA 2004 International Business Trip presented by.

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Exploring The Business of Architecture Slide 2 CU EMBA 2004 International Business Trip presented by Slide 3 R obert McAllister Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 4 RE d McConnell Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 5 EDRD oug Conarroe Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 6 B EDR B rian Bedford Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 7 B E D DR D arrin Moore Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 8 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Slide 9 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge Slide 10 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge Slide 11 Why Architecture? How do you go to Europe and not study architecture? Its unique, fun, exciting, fulfilling Professional services model Real estate team needs us Slide 12 Todays Consulting Tour Will Describe the architecture industry Give an overview of architectural history Introduce Austrian and Hungarian firms Share our trip expectations and answer your questions Slide 13 - WILLIAM E. VALENTINE As architects, our place on this planet is to improve the situation, not just offer a new style of something. - WILLIAM E. VALENTINE Slide 14 Our Process Interviewed 4 architectural firms Jeff Keast Paul Sapporito Pahl, Pahl & Pahl RNL Design Attended Museum of Contemporary Art-Denver Design Competition Slide 15 Our Process MCA-Denver Design Competition Different architectural firms presented Fashion show of works completed Flavor of work, i.e. light & space. Winner announced April 12, 2004 David Adjaye Adjaye Associates Slide 16 Key Attributes Slide 17 Creativity & Form Slide 18 Key Attributes Function and Usability Slide 19 Function and Usability - Space Planning Slide 20 Key Attributes Business Slide 21 What is an Architectural Firm? More than a draftsman Artist Urban planner Interior designer Landscape designer Facilities master planner Engineering (acoustic, light and lighting, electrical, mechanical, heating, venting, and air conditioning) Project Manager Builder Slide 22 Architecture Industry 91,000 registered architects in U.S. $400B in construction contract value 66% new construction,34% renovation 190,000 employed in U.S. 2% of total billings are sole proprietorships Slide 23 Architecture Industry Growing U.S. architectural service exports $867M* in 1990 $5.25B* in 2000 (*Construction, Engineering, Architectural, and Mining Services ) Typical market segments Commercial Government Private nonprofit Slide 24 Market Segment Business Cycles Government Commercial Private nonprofit Slide 25 Economic Influences on Architecture The Perfect Storm Dot-com bomb destroyed projects September 11, 2001 determines architectural decisions Recession Rising liability insurance rates Firm Responses Staff reductions Contract labor and overhead reductions Slide 26 Factors Impacting Architecture Outsourcing Internet Computer Automated Design (CAD) 9-11 Slide 27 Are Architects Profitable With Gross margins of only 4% to 12%? Profit margins of 1%? Varying customer requirements? Mandated regulations? Slide 28 Revenue is Generated By: Winning design competitions (a centuries-old process) Winning government bids; cost-plus Private sector projects; repeat business Design-build Diversified services (interior design) Renovation and adaptation Slide 29 RNL Design Corporation Slide 30 Distinguished Alumni Three EMBA Alumni @ RNL John RogersClass of 83 Josh Gould Class of 95 Phil GoedertClass of 98 Phil Retired from the practice in December 03 Slide 31 History Firm founded in Denver in 1956 44-year history Currently 4 th largest firm in Denver based on billings Offices in LA, Orange County, and Phoenix Slide 32 Practice Areas Government Commercial Transit & Maintenance Urban Design Landscape Architecture Corp Interiors Facilities & Master Planning Religious Leisure & Entertainment Slide 33 Financial Overview Confidential Complete set of financials provided to team by RNL Since 2000 RNL has followed industry trends Reduced billings and reduced headcount Change orders hard to get approved Pipeline of future projects weak Slide 34 Financial Overview In 1998 firm developed an 8-year strategic plan Net Growth targeted at 15% 11% growth, 4% inflation Economic slowdown started 2 nd quarter 2001 1998 thru 2001 growth exceeded plan 2001 to 2003 growth on target Slide 35 Financials 2001 Two Net fee goals-established in 1988 Opportunity Growth Strategic Growth Net fees goal was $23,000,000 Actual was $ 18,788,000* * RNL Design portion Slide 36 Annual Report Quote Early in the second quarter (2001), it became obvious that a slowdown was beginning to occur, as projects were being delayed, or were slow to start. Extra services orders were becoming harder to negotiate, and many projects were put on hold, with little advance notice Slide 37 Annual Report Quote as a result adjustments in staffing had a lag time, which resulted in higher indirect time and lower profitability than was planned. Adjustments in staffing and staff requirements continue to be a challenge Slide 38 Financial Revenue Allocation- $28,445,373 Advertising 10% of Fees Slide 39 Costs & ROI People = largest expense Bankers set ROI RNL CFO manages for positive ROI How? Slide 40 Large vs. Small Firm Comparison Large Firm RNL Compete for projects 1 of 4 accepted Many new projects Architect is lead Wide range of services Creativity & Form Outsource internationally Small Firm Paul Sapporito, Jeff Keast Word-of-Mouth 1 of 5 accepted Reliance on repeats Architect is lead Specializations Function & Usability Outsource locally Slide 41 U.S. vs. European Firms U.S. Develop schematics Write specifications Describe building process Movement to mixed use Big Boxes Build to invest European Develop schematics Dont write specs Architect also the builder Compact city designs Mixed use cities Firm size comparable to U.S. Build to suit Slide 42 Architecture in Colorado Slide 43 We serve developers, politicians, and contractors. But I think we really have to be the leaders. J. ROBERT HILLIER Slide 44 European cities evolved from the castle (battlemented) walls Carcassone, France French guys using mortars Urban design origins in Europe How Cities Evolved Slide 45 European architecture ranges from very old to very new Brunelleschis St. Maria del Fiore in Florence, built 1418-1434. First freestanding copula. Filippo Brunelleschi (Italian) 1377-1446 Roman and Renaissance style Art-Nouveau to Modern to Deconstructivism Frank Gehrys Guggenheim Museum in Bilbao, Spain. Built 1993-1997. Frank Gehry (American) Slide 46 Building styles you will see Hungarian Academy of Sciences, Budapest. Built 1864 Neo-Renaissance style Arched windows and promenade square styling Karlskirche, Vienna. Built 1716. Boroque and Rococo style extremely ornate gilded ornamentation neo-classical porch Slide 47 Building styles you will see Hungarian Academy of Sciences, Budapest. Built 1864 Neo-Classical style Greek and Roman roots Columns, columns, columns Rounded pediments above windows Votikirche, Vienna. Built 1800s. Neo-Gothic style elements of 11th and 12th century gothic style mostly churches height and spires lifting to the heavens Slide 48 Todays Economic Report Slide 49 Austrian Architecture Market Country Economic Growth 0.7% in 2003 1.7% in 2004 forecast 2.5% in 2005 forecast Construction growth of 2.5% Important Projects Vienna international airport control tower 20M Vienna airport train station Slide 50 Hungarian Architecture Market Country Economic Growth 2.9% in 2003 3.5% in 2004 forecast 3.8% in 2005 forecast Construction Growth 12.9% January 04 vs. 03 Important Projects Tran European North-South Motorway 1B Magyar radio building 40 to 60M 40,000 new homes Slide 51 Visits in Vienna Coop HimmelB(L)au Architekturzentrum Wien Moser Architekten Alternate querkraft Architects Alternate Slide 52 Slide 53 Coop HimmelB(L)au Founded in 1968 in Vienna, Austria, by Wolf D. Prix and Helmut Swiczinsky Focus within the fields of Urbanism, Architecture, Design and Art. In 1988 and 2000 second offices were opened in Los Angeles, California and Guadalajara, Mexico, respectively. Slide 54 Slide 55 Architekturzentrum Wien Museum devoted to Austrian Architecture Architecture in the 20 th century exhibit Personalized tour scheduled Slide 56 Slide 57 Moser Architekten Large full service firm Project Development Project Management Architecture Additional Services Founded in 2000 Slide 58 Architecture is art. architecture is sustainable, appropriate and physical. its beauty comes from the inside. the content shapes the building. Slide 59 querkraft Small full service firm Market segments Commercial business Shops and restaurants Residential single family housing Multi family housing / apartment complexes Public construction Urban development Slide 60 Slide 61 Visits in Budapest Laszlo Rajk - Kztigon Architects' Studio Graphisoft Slide 62 Laszlo Rajk Kztigon Architects Studio Architecture is parasitic - it settles on already existing formations. The Via Appia still functions as a road, old town structures remain unchanged - indeed, the new towns are the continuations of the old. Tiny hovels were built into the mega-structure of the Marcus Aurelius Theatre, luxury penthouses or attics sit astride scruffy old buildings, and utopianists still dream of family homes built into the structural skeletons of skyscrapers. Professional Experience 1992- Hungarian Film Academy, Budapest - professor of film architecture 1990- Kztigon Architects' Studio - principal, chief architect 1990-96 Member of Parliament Member, Committee on Culture Member, Committee on Foreign Affairs 1986-1990 MAFILM, Budapest - production designer before 1986 worked as an architect at several companiesHungarian Film Academy Slide 63 Graphisoft Headquartered in Budapest A leading provider of design and building information management solutions. Graphisoft employs more than over 300 people worldwide. ArchiCAD competes with AutoCAD by Autodesk Used by more than 100,000 architects, civil engineers, facility managers and building professionals. In July 1998, the Company established Graphisoft Park, a high-tech office park on the banks of the Danube. Slide 64 Our Research Hypotheses European architects design for greater permanence of use Outsourcing is changing the nature of the business E-mail and the internet improve design process Terrorism threats are influencing building design Slide 65 Trip Objectives Compare American, Austrian, and Hungarian architectural practices Examine our hypotheses Experience how EU membership impacts firms Tour architecture projects Have a good time Slide 66 Vienna Calling Slide 67 In our profession, substance is a long- term thing. We're putting something out there that will last 50 or 100 years, and that's different. ROBERT G. PACKARD Slide 68 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge Slide 69