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

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Presentation on theme: "Exploring The Business of Architecture. CU EMBA 2004 International Business Trip presented by."— Presentation transcript:

1 Exploring The Business of Architecture

2 CU EMBA 2004 International Business Trip presented by

3 R obert McAllister Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

4 RE d McConnell Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

5 EDRD oug Conarroe Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

6 B EDR B rian Bedford Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

7 B E D DR D arrin Moore Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

8 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by

9 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge

10 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge

11 Why Architecture? How do you go to Europe and not study architecture? It’s unique, fun, exciting, fulfilling Professional services model Real estate team needs us

12 Today’s 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

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

14 Our Process Interviewed 4 architectural firms Jeff Keast Paul Sapporito Pahl, Pahl & Pahl RNL Design Attended Museum of Contemporary Art-Denver Design Competition

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

16 Key Attributes

17 Creativity & Form

18 Key Attributes Function and Usability

19 Function and Usability - Space Planning

20 Key Attributes Business

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 …

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

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

24 Market Segment Business Cycles Government Commercial Private nonprofit

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

26 Factors Impacting Architecture Outsourcing Internet Computer Automated Design (CAD) 9-11

27 Are Architects Profitable With … Gross margins of only 4% to 12%? Profit margins of 1%? Varying customer requirements? Mandated regulations?

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

29 RNL Design Corporation

30 Distinguished Alumni Three EMBA RNL John RogersClass of ‘83 Josh Gould Class of ‘95 Phil GoedertClass of ‘98 Phil Retired from the practice in December ‘03

31 History Firm founded in Denver in year history Currently 4 th largest firm in Denver based on billings Offices in LA, Orange County, and Phoenix

32 Practice Areas Government Commercial Transit & Maintenance Urban Design Landscape Architecture Corp Interiors Facilities & Master Planning Religious Leisure & Entertainment

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

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 thru 2001 growth exceeded plan 2001 to 2003 growth on target

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

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…”

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”

38 Financial Revenue Allocation- $28,445,373 Advertising 10% of Fees

39 Costs & ROI People = largest expense Bankers set ROI RNL CFO manages for positive ROI How?

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

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 Don’t write specs Architect also the builder Compact city designs Mixed use cities Firm size comparable to U.S. Build to suit

42 Architecture in Colorado

43 “We serve developers, politicians, and contractors. But I think we really have to be the leaders.” J. ROBERT HILLIER

44 European cities evolved from the castle (battlemented) walls Carcassone, France French guys using mortars Urban design origins in Europe – How Cities Evolved

45 European architecture ranges from very old to very new Brunelleschi’s St. Maria del Fiore in Florence, built First freestanding copula. Filippo Brunelleschi (Italian) Roman and Renaissance style Art-Nouveau to Modern to Deconstructivism Frank Gehry’s Guggenheim Museum in Bilbao, Spain. Built Frank Gehry (American)

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 Boroque and Rococo style extremely ornate gilded ornamentation neo-classical “porch”

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 1800’s. Neo-Gothic style elements of 11th and 12th century gothic style mostly churches height and spires — “lifting to the heavens”

48 Today’s Economic Report

49 Austrian Architecture Market Country Economic Growth 0.7% in % 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

50 Hungarian Architecture Market Country Economic Growth 2.9% in % 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

51 Visits in Vienna Coop HimmelB(L)au Architekturzentrum Wien Moser Architekten – Alternate querkraft Architects – Alternate

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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.

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55 Architekturzentrum Wien Museum devoted to Austrian Architecture Architecture in the 20 th century exhibit Personalized tour scheduled

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57 Moser Architekten Large full service firm Project Development Project Management Architecture Additional Services Founded in 2000

58 “Architecture is art. architecture is sustainable, appropriate and physical. its beauty comes from the inside. the content shapes the building.”

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

60

61 Visits in Budapest Laszlo Rajk - Köztigon Architects' Studio Graphisoft

62 Laszlo Rajk – Köztigon Architect’s 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 Hungarian Film Academy, Budapest - professor of film architecture Köztigon Architects' Studio - principal, chief architect Member of Parliament Member, Committee on Culture Member, Committee on Foreign Affairs MAFILM, Budapest - production designer before 1986 worked as an architect at several companiesHungarian Film Academy

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.

64 Our Research Hypotheses European architects design for greater permanence of use Outsourcing is changing the nature of the business and the internet improve design process Terrorism threats are influencing building design

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

66 Vienna Calling

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

68 B E D DR Architectural Consulting Exploring The Business of Architecture CU EMBA 2004 International Business Trip presented by Designed with Knowledge

69


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