According to the latest IBIS report, the architectural sector has performed reasonably well over the past five years, however there are leaner times ahead, the research group found.
While overall industry revenue is projected to grow over the next five years through 2022-23, to $AUD 6.0 billion, at the same time the IBIS report says this represents a fall of 1.1 percent due to a strong decline in multi-unit apartment and townhouse construction, which is expected to reduce industry demand.
IBIS notes that in order to counter this trend, “some large industry firms have expanded into overseas markets to capture new revenue streams.”
“Other firms have improved links with construction firms, or expanded their range of services,” it says.
However, adopting these measures has also “proved difficult for small firms and sole proprietors,” says IBIS, which it also notes, also make up the bulk of the industry.
“These smaller firms often do not have the scale or brand recognition to acquire other firms or compete on tenders for substantial developments,” says IBIS.
Rather, it notes, these boutique architecture firms have increasingly been acquired by larger integrated firms to expand their capabilities.
However, one of positive growth area says IBIS, is the increase in green buildings, which it finds, that despite the initial higher cost of design and construction, often yield energy cost savings, which makes them more attractive to clients.
Rising energy prices have also stimulated interest in green building design over the past five years, which has added to this growth.
This trend, says IBIS, has “helped differentiate architecture firms that have developed strong green building credentials.”
“Over the next five years, firms are expected to continue focusing on their green architecture services due to growth in environmental awareness and sustainability initiatives,” IBIS says.
IBIS further says that the industry has also faced increasing competition from draftspeople over the past five years.
Draftspeople, notes IBIS, offer cheaper rates for some services provided by architects, such as preparing computer-aided design and drafting drawings, which is why many clients have opted to hire draftspeople in order to cut costs.”
This competition has been made possible through the increased the availability of computer-aided design (CAD) software.
“This reflects the wholehearted market acceptance of the industry’s services and increasing market saturation,” says IBIS.
Overall though, IBIS found the future for the architectural industry to be positive, adding that “Profit margins in the industry are strong, largely due to the value-added nature of services.”
