Managing Principal of GHD Woodhead’s Adelaide studio, Michael Hegarty, says outdated and insular models of practice that don’t respond to the needs of clients will eventually push architecture firms out of the competition.
Responding to IBISWorld’s Architectural Services in Australia report update, which points out the growing competition faced by traditional architecture practices from integrated Architecture and Engineering (A+E) design-led firms, Hegarty tells A&D that the shift in clients becoming more attracted to firms with broader offerings is not new.
“This shift has long been forecast, notably in 2001 by then Royal Institute of British Architects president Paul Hyett,” he says.
“It is now self-evident that architectural businesses have diverged to become either larger integrated practices at one level or else smaller specialist and local boutique firms. This has been driven largely by commercial and government clients that deliver large scale projects who are looking for simpler robust contractual relationships with consultants and that is best delivered by a multi-disciplinary practice.
“Many of the firms now presenting an integrated offering started as architecture practices, with a lesser number reaching a similar position from an engineering starting point. Over many decades, this has become the default operational model for clients and architects working on large projects in the US, UK and Middle East.”
Hegarty points to foreign-based firms such as AECOM, Arup, Gensler, HDR and Jacobs that successfully operate this model overseas and have expanded their operations in Australia in recent years.
He also says GHD Woodhead has benefitted from the integrated service model, with engineering consultancy GHD announcing its acquisition of architecture firm Woodhead in 2014, a month before it merged with North American consultancy Conestoga-Rovers & Associates (CRA) to expand its global portfolio. The latter deal is one of the largest private stock transactions in the engineering and environmental consultancy industry.
“The union reinforces a shared vision that design is a collaborative and integrated process, at its heart. The union enriches the firm’s long history in the delivery of complex global projects,” managing director of Woodhead Angelo Di Marco said at the time of Woodhead’s acquisition.
These mergers and alliances have allowed the firm to be at the forefront of what is a “somewhat inevitable catch-up for local architectural practice to match the international norm”, says Hegarty.
“Many of our fellow architectural practices are amalgamating to grow while others are reducing in capability as they struggle to cling on to outdated models of practice that don’t respond to the needs of clients,” he observes.
“The GHD Woodhead national network of design-led studios and the range of skills and disciplines that we offer mean that we are very fortunate in being able to truly shape the cities and landscapes of Australia.
“This doesn’t mean that we always do everything ourselves and indeed we frequently partner and collaborate in the best interests of specific projects. But the collaborations are made more cohesive through the technological and systems resources that we can leverage to integrate the team due the scale and diversity of our wider operations. We see our role as making things simply better for our clients.”
Hegarty’s comments echoes the report author Sebastian Chia’s suggestions of firms either broadening the range of services they provide to clients, or segmenting into areas of specialisation – particularly with the growing interest in green building options.
“Architects can add value and possibly expand price margins through offering clients design services that provide energy conservation on buildings and lessen the environmental impact of the construction phase and the final product,” noted Chia.
However, not every firm believes global alliances are the way forward. Australia’s largest architecture practice Woods Bagot has reportedly rejected merger offers from overseas firms looking to establish themselves in the Australian market, although this has not stopped it from steadily growing its international presence.
Consolidations and specialisations are also not easy terrains to navigate, acknowledges dwp|suters’ CEO Leone Lorrimer, although they are challenges that can be turned to opportunities.
Read about how architecture firms can plan for their survival HERE, or learn about the latest industry updates with the IBISWorld industry report.