To the outside observer, architecture probably does not seem a dynamic profession. Inside the profession, however, practicing architecture has been about managing the pace of change over the past generation. Not all change has been good (see, fee erosion and schedule compression) and not all has been bad. It usually requires the perspective of a decade or so to judge whether or not something was a trend or a passing fad. One of the byproducts of advancing technology is the increasing pace of change and so trends take less time to mature into practice or fade into disuse. Three trends of this decade merit exploration for their durability and impact on the profession.
The first of these is the new workplace design. Granted, this trend would seem to fail the maturity test but in just a few years, workplace design has become part of a much bigger trend. Originally driven by the whims of high tech users and perceptions (or misconceptions) about Millennials’ work habits, office design is now an important part of the strategy for attracting, retaining and engaging talent.
Second is the status of green building. Over the past few years, there has been a momentum shift in sustainability and a groundswell in the emphasis on building performance. Certifications like EnergyStar, Living Building Challenge, WELL Building Standard and Passive House have gained in awareness and are adding a layer of performance verification to projects that were aiming for LEED certification. There are those talking about green building moving forward without LEED but the concept of setting standards for design and construction is the foundation that LEED provides the industry.
Finally, the business side of architecture is facing several challenges that are being met increasingly by mergers and acquisitions. In the general business community, profit pressures and the scarcity of skilled workforce are driving industries to consolidate in order for growth to occur. Those same dynamics and a looming wave of retiring principals have pushed mergers among architects to record high levels.
These aren’t the waves of the future. They are the trends of today and a shift in the business cycle could sidetrack all of them. We saw that happen in 2009. For the time being, these trends are simply some things more people are doing now than before.
The Workplace as Strategy
It would be safe to blame the whole new workplace design on Google. But it would also be wrong. The Internet search giant has been lifted up as an example of what really smart young workers want in a workplace and the Google space is somewhat legendary for its heretofore outrageous amenities. Game rooms, free food in cafes, volleyball courts and sliding boards were among the play spaces that Google employees had to complement their workspaces. There was an element of rebellion in this new concept of what the workplace could be but there was also a method to the madness.
Google was founded by brilliant young engineers, not unlike most of the second wave of tech companies. The work schedules of these founders were different from traditional businesses. Marathon coding sessions were punctuated by spells of brainstorming as groundbreaking algorithms were grown into new businesses. Tech workers spent extended hours at their jobs and companies like Google and Apple and Yahoo recognized that the office had to have places for the employees to blow off steam or just take a break. Certainly workers could go to their homes for that but it was in the best interest of the company to have the employee find that respite at the office. A new formula emerged for workplace.
The physical manifestation of that formula was a large open floor plan, sprinkled with places that workers could collaborate and spaces that were private for meetings. The office included some element of play or a space where workers could unplug from their work. The formula gained adopters. It got notoriety and plenty of publicity. Open plan became a trend.
The origins of the trend were not just a response to new work habits. When the economy began recovering in 2010, companies reevaluated how they did all aspects of their businesses, including how they used real estate.
“The new office trend started when market pressures grew and clients looked at their expense side and asked how they could decrease in terms of the overall space provisioning,” recalls Donna Becco Schroeder, principal for facility and occupancy strategies for Stantec in Chicago. “Then we shifted the conversation to making the workplace more effective.”
Schroeder is an architect who has spent most of her career planning and designing offices. Her role in this new way of looking at the office was that of workplace strategist. Rather than simply trying to accommodate clients’ wishes by figuring out how to fit the same number of people into smaller spaces, workplace strategists looked at how people used the places where they worked. Designers conducted ethnographic research, studying how employees behaved during the work day and tailored office layouts to their findings.
“We look at the function of the space. Time studies show how much time each space is used. Surveys of workers find what people need to do and where they need to do it,” Schroeder explains. “We do studies of what is used and what is not. There is no rule of thumb but what usually results is a need for smaller personal spaces and larger common spaces.”
This area of study and design – now also referred to as occupancy strategy – has expanded to include the broad spectrum of building types. The aim is to look strategically at spaces to translate how the client wants the occupants to experience the building. Hotels aren’t just a collection of bedrooms with a reception area and dining. Because of how corporations function now, hotels are also offices. Hospitals, for example, serve their patients in office settings as often as they do in clinical spaces. The desired result is to create the best design for the specific experience within a facility, so that the hotel guest enjoys the working space as much as they do the sleeping space or exercise room.
In practice, of course, most clients don’t know they need a workplace strategy. Far too often over the past few years, architects tasked with designing an office find a client who has read up on the trends in office design and has a laundry list of cool things they want in the new space (usually accompanied by the article from Architectural Record or Interior Design that inspired them). Without proper guidance or research from their architect, clients can end up with open floor plans that function no better than the cubicle farms they replaced, but with a lot more distractions for their workers.
“More and more companies are asking for this kind of design, referencing what they think is going on at Google,” notes Jeff Young, associate principal at Perkins Eastman. “There is not a one size fits all solution to workplace design. Cultures are different. Departments within companies are different.”
Young echoes Becco Schroeder’s comments about studying how the space is used, pointing out that where the collaborative spaces or private spaces are positioned relative to work stations makes a difference in how or whether those spaces will be used. Putting gathering places halfway across the office from where engineers sit will inspire the engineers to create a collaboration space of their own choosing. Fitting break or play space into the floor plan poorly can result in noise or visual distractions that reduce productivity. As with most architectural problems, the key is good early planning.
“We do strategic planning and programming differently than we used to,” says Dan Delisio, principal/owner at NEXT Architecture. “We do interactive workshops with clients, to better inform our design process early. We tailor workshops to suit the needs of the client, eliminating the ‘one size fits all’ process. We want to get their feedback on design early in the process.”
Delisio, who has designed new spaces for Rice Energy, Ansys and Autodesk within the past year, makes an interesting point about the difficulty clients are experiencing. Even seasoned facility managers may have little or no experience with newer office concepts and find it difficult to articulate what they want. It’s often easier to react to images of what exists than it is to visualize something new. Clients that have done open plan projects have the benefit of knowing what worked and didn’t work, like not anticipating the noise level that would result from a floor full of multi-station work tables.
“Many clients still want an open plan but request we deal with acoustics and privacy,” says Delisio. “We can utilize interstitial spaces that are hard to plan with collaborative spaces to suit the client’s need and maintain that open plan. We can make better use of the space and keep the buzz and collaboration areas
Buzz and collaboration are two words J.C. Pelusi uses to describe the new space at JLL Center at Tower Two-Sixty. Pelusi, who is international director and market leader for Jones Lang LaSalle Pittsburgh, says the opportunity to create a new workplace had a direct bearing on its choice of property and floor location. As the anchor tenant in the new 18-story building developed by Millcraft Investments, JLL could have been expected to take the top three floors but Pelusi had a different goal in mind when he made the decision. Rather than the obvious location, Pelusi opted for the lowest office levels because of the access to a roof-top garden and patio on the 12th floor.
“We were going to a new way of working. We were going to bench seating and it was really dense. The ability to have that kind of amenity is important with 400 people working here,” he notes. “I just felt having that outdoor space overlooking Market Square was huge. The deciding factor truly was the ability to get that patio.”
Pelusi sensed that his staff would want to step away from their sit/ stand desks during the day and believed that having the option to take a laptop to an outdoor space on a sunny day would be an attractive option. The JLL offices (which were designed by Perkins Eastman) have other collaborative and private spaces to break up the tedium of the denser workstations or to work on a problem with colleagues. JLL staff has the option to work regularly at one desk or to “free address” where they land every day. Rumor had it that Pelusi worked at a different station every day for the first month. While that was not the case, the 30-year veteran of traditional offices is effusive in his pleasure with the new way of working.
“I do bounce around. I find myself gravitating to the same area but I am free address,” he admits. “There’s energy in interacting more with your colleagues. We’re finding people tend to sit in groups and they are learning from each other. There’s more of a buzz in the office. The brokers were the group I was most worried about accepting this but they are really enthusiastic about it.”
One of Pelusi’s colleagues, Jeffrey Ackerman from CBRE, has also adopted the free address style of working, preferring to carry all that he needs to operate with him in his iPhone and tablet. CBRE adopted the open floor plan in 2014 nationwide. Ackerman say about 30 percent of the Pittsburgh office workers are free address. He also agrees that the trend isn’t fading.
Perhaps the trend persists because at its roots, the new workplace is not about being trendy but rather about meeting the workforce where it wants to work. There was a certain motivation for the new office that came from the perception that young workers – the Millennials – had very different expectations about work and life. To attract Millennial talent, the theory went, you need to have cool space that allows the younger generation to work and play and use all its new technology.
With the benefit of a few years and some research it turns out that the expectations of the next generation aren’t much different than their elders. That actually says more about the older generations than it does about the Millennial generation. Companies have discovered that all of their workers want space to collaborate, recreate and concentrate. They have also discovered that the workforce strategy needs to be about attracting all kinds of talent, not just young talent. It’s employee engagement that is the goal.
“Suggesting that toys or whatever are the differentiation for Google is wrong. It’s the engagement of employees, the mobility of employment,” Young offers. “Within the workplace, the ability to have a cup of coffee and interact with fellow employees is huge. This generation of workers wants the option to work multiple places.”
Jeff Young says that when Perkins Eastman was programming the new Google space at Bakery Square 2.0, the software giant was clear about focusing the architect on making the workplace more effective. Google wasn’t concerned about doing the fun stuff but rather making the workplace more productive. Its motive wasn’t to take away the fun; instead, they wanted to better identify what constituted work for the staff and how to create the environment where the workforce would be best equipped to do that work. He says that goal is common to other clients.
“Companies want improved performance, measured in productivity but also in engagement of the employees at the workplace,” Young concludes. “Supporting the different way people work is vital to success. I don’t think it’s the pinball machines and ping-pong tables.”
Green Building: Performance Not Prescription
It’s surprising to recall that a decade ago the number of LEED certified buildings in the U.S. numbered in the hundreds. Back then, Pittsburgh was one of the cities that took leadership in green building. The Green Building Alliance (GBA) had been in existence for a dozen years by that time. In 2006, Pittsburgh was home to the most LEED-certified buildings (22) of any U.S. city.
At that time, LEED was a six-year old certification standard. With its combination of points for achieving standards in site design, energy, indoor environment and materials, LEED certification encouraged architects and property owners to plan to build more sustainable buildings that were better for their occupants. More importantly, it established a standard for design that did not previously exist. As consciousness about green building was raised, LEED certification was enhanced. Today LEED v.4 is the standard for the industry. More than 201,000 LEED-certified buildings exist. The United States Green Building Council (USGBC) and its certification arm, the Green Building Certification Institute (GBCI), are continuing to promote the best practices of design and construction for the built environment. But there is a growing sense among architects that LEED is no longer the only measuring stick or the only path to the best building.
“The market has been transformed in that more people are aware of green building. Not every building is getting certified but buildings are higher-performing,” notes Gary Moshier, partner at Moshier Studio and one of the founders of GBA. “I think LEED is always going to be around. If anything the standards will be ratcheted higher to continue to transform the market. That’s what USGBC set out to do: transform the market.”
What seems to be the biggest change in green building – and that moniker seems almost inadequate – is that the emphasis on building performance has moved to the forefront of the conversation. Certifications like EnergyStar, Living Building Challenge and Passive House are performance-oriented standards rather than prescriptions for how to build a green building. The shift in conversation seems like a natural evolution as green building goes from being a “movement” to a way of operating.
“There has been a language shift but not necessarily an actual shift yet,” says Aurora Sharrard, executive director of GBA. “We recognized that shift in our mission from green building to high performance but I’m not sure design has changed that much. What we do see with the change in language is a broadening of green building across the entire industry, including operations and maintenance. The 2030 District is a great example of that.”
GBA was an early adopter of the 2030 Challenge, establishing a 2030 District Downtown in 2012 – adding Oakland later – when only two other cities were on board. The District now includes 470 buildings encompassing 74.5 million square feet, 69 percent of the total for the district. The owners of those buildings have committed to a 50 percent reduction in energy and water usage and transportation emissions by 2030.
As awareness and capabilities about green building expand, so do the advocacy groups that want to take the progress made thus far to a higher level.
Sharrard points out that the number of third-party certifications that exist have multiplied, making green building certification more complicated. GBCI is involved in the verification of seven different certifications, only one of which – LEED – was developed by USGBC. In August 2015, it added the WELL Building Standard to its roster. The International WELL Building Institute is now chaired by retiring USGBC CEO Rick Federizzi. WELL Building is one of the newer of the supplemental certifications to which Aurora Sharrard referred.
WELL was founded by a New York-based developer of apartments, Delos Living LLC, in 2012 as a way to promote better design for occupant health and to differentiate Delos properties. The WELL Building Standard® sets performance requirements in seven categories – air, water, nourishment, light, fitness, comfort and mind – that are relevant to occupant health in the built environment. WELL certification is based on performance and requires comprehensive project documentation and an onsite audit.
Its founders saw WELL as a complement to LEED, providing more in-depth attention to health factors beyond LEED’s scope and verification after occupancy. WELL Building Standard has a mission similar to what LEED’s in raising awareness about indoor occupancy wellness and it appears that there is plenty of work to do. The Phipps Center for Sustainable Landscapes is the only WELL-certified building in Pittsburgh and one of only nine in the world. Phipps is also the only building to be certified by the Living Building Challenge (although the new Frick Environmental Center is in the process). A very rigorous standard, Living Building Challenge has had a secondary benefit to the industry in its impact on products.
“Living Building Challenge has done a great job of transforming how manufacturers are doing business,” says Moshier. “They are getting materials labeled or focusing on green manufacturing processes. Again, it’s market transformation.”
“We don’t often have clients who ask about the health and wellness of the building but that is something I try to keep in mind when designing,” notes Bruce Pollock, principal at RSSC Architecture. “It has gotten much easier to select materials that are good for the environment. Manufacturers have done a good job – especially with the finishes – of removing VOC and toxic materials that are bad for the health of the occupants.”
Moshier sees an opportunity for Living Building Challenge and another standard, Passive House, to be more transformative than LEED. He likes the fact that Passive House lays out a path to certification, although it’s a difficult one.
“Passive House gives a kit of parts. It gives tools to achieve the goals,” he says. “It explains how to build a better envelope.”
Like WELL Building Standard and LEED before it, Passive House faces the challenge of gaining mainstream market awareness. To start with, the name itself is confusing. Adapted from the German word Passivhaus, which meant passive building, the name translated to house in the U.S., giving the impression that it was a residential standard. Passive House started in Europe, where many jurisdictions and whole nations have adopted the standard as building code. While more than 30,000 projects have been certified under the international Passive House standard, there are currently only 126 certified or pre-certified Passive House projects in the U.S. Four of them are in Western PA, where only two residential projects have been certified.
Craig Stevenson, executive vice president of James Construction and Certified Passive House Consultant (CPHC), is confident that the dynamics of the Passive House market are changing.
“There is a major push for Passive House outside of residential in the U.S. There are a lot of commercial projects in the design stage and under construction that will be Passive House standard,” asserts Stevenson, who is one of the founders and board members of the Passive House Alliance US (PHAUS) Pittsburgh chapter. “I’m confident that commercial projects will outweigh residential by 2017.”
“The trend in Passive House is going to move more to commercial than residential,” agrees Nathan St. Germain, RA CPHC, principal at Sewickley-based Studio St. Germain. “One reason behind that is that the physics of the system – the metrics that you need to hit – work better in commercial because there is a higher surface to volume ratio.”
The Passive House standard focuses mainly on reducing energy usage, mainly through the design of an airtight building envelope. The certification requires a blow test result of no more than 0.6 changes of air per hour at 50 Pascals of pressure. That’s roughly the amount of air than can penetrate a poorly insulated electrical outlet. The result is a building that uses 75 percent less energy, is quieter to occupy and has superior indoor air quality. Proponents of Passive House also feel that the concept moves the conversation about performance in the right direction, going from passive to active to renewables.
“There are a lot of ways to get to the metrics [of low energy use], but if you deal with the envelope first – that’s the passive part – that helps the active parts of the system, If you get the passive part right, the active parts can be smaller,” explains St. Germain. “If you go to renewable energy then, the need will be less because the demand will be reduced.”
St. Germain points out that the research for Passive House originated at the University of Illinois in response to the oil embargo in the mid-1970s. When the price of fuel stabilized for 25 years, the enthusiasm for the concept moved to Europe.
“Why?” asks St. Germain. “Because the cost of fuel was much higher.”
An unintended consequence of the Passive House method is that even when a project falls short of certification, the result is an extremely efficient building. James Construction built the Hilltop Community Healthcare Center in 2014 with a design that Thoughtful Balance Architects intended to get certified. The building narrowly exceeded the level of air infiltration to qualify but the building thus far has been using 20 percent of the energy consumed in comparable buildings.
“The project was a successful failure,” laughs Stevenson.
Progress on Passive House in the U.S. is moving fastest in San Francisco, the Pacific Northwest and New York City – where Mayor Bill de Blasio is pushing through code changes that will require Passive House for construction. But, like with green building in the 1990s, Pittsburgh is taking a leadership role right behind those cities. Pittsburgh is in line to host the 2017 North American Passive House Network annual conference.
Stevenson points out that PHAUS Pittsburgh secured funding to have GBA provide Certified Passive House Designer and Consultant training through the Passive House Institute’s educational platform. The training is the first outside PHAUS and it will allow syndication of CPHC certification in the region at a more rapid pace. Three classes are scheduled, beginning with one in September. All three classes are full.
All these incremental gains will add up to better performing buildings. If the economy of Pittsburgh continues on its current arc, there should be fewer hiccups to disrupt the continued advance of the conversation. For a veteran of the conversation like Gary Moshier, the rewards of pushing higher performance are palpable.
“Awareness is much higher about why we should do better buildings and I think more people are capable of designing higher performing buildings, with or without LEED,” he observes. “When they were talking about the Google projects, Walnut Capital said there used to be just a couple specialist architects who could do green building. Now it’s business as usual.”
For an advocate like GBA, there isn’t going to be a time when the organization feels like there is enough progress to stop advocating. For certain, until all the resources consumed by the built environment can be renewed – an unlikely scenario this side of Star Trek – there will always be higher performance to achieve. But GBA’s executive director concedes that the argument about sustainable design and construction has been moved forward.
“It’s to the point where the question isn’t should they do LEED but whether it should be LEED plus something else,” observes Sharrard. Asked if she can see a time when the industry so thoroughly accepts LEED standards that certification would become obsolete, Sharrard jokes, “I can dream.”
My Firm/Our Firm
The extreme nature of the business cycle that began with the financial crisis in 2008 spawned some extraordinary merger and acquisition (M & A) deals. While the number of deals pales in comparison to those done in the 1980s, the dollar volume of M & A deals has set records as the recovery expanded. Last year marked the highest volume of M & A activity on record and there is a possibility that 2016 will top that.
There are a number of reasons why mergers are up. Global competition is intense but a volatile economy has left some companies vulnerable financially and a logical target for a takeover. The amount of private equity available for investment is staggeringly high and with few places to get return without fracturing risk models, private equity is backing more M & A deals. The trend in M & A has even been creeping into the architecture and engineering business as the downsizing and fat-trimming of the last business cycle left many firms unprepared to manage the workflow of the steady uptick in activity over the past few years.
“There are a few reasons for M & A deals in engineering or architecture, mostly about personnel and scale,” says Peter Lieberman, a partner in the Corporate Finance Division of Schneider Downs & Company. “Another is gaining complementary skill sets and expertise within an industry or type of project.”
“Firms may also be looking at [M & A] for a succession plan. One of the biggest challenges in professional services is management and succession planning. Owners need to transfer the management responsibility and create the liquidity to withdraw the value of their equity in the business.”
How hot is the M & A trend in architecture and engineering? Zweig Group’s 2015 Merger and Acquisition Survey found that 42 percent of all firms were considering buying another firm and 68 percent had a merger or acquisition as part of their five-year strategy.
Mergers and acquisitions among architectural and engineering firms have made a significant impact on the regional market. Since the downturn, two of Pittsburgh’s largest A/E firms were acquired, as have several others of note. At their respective pinnacles, both Astorino and Burt Hill were the region’s largest firms. Today, Astorino has been absorbed into CannonDesign, with its remaining principals – Louis D. and Louis P. Astorino – leaving the firm during the summer. The integration of Burt Hill into Stantec has been accomplished for several years and, while it was a bumpy ride at first, the firm has been growing its billings and head count steadily.
Other noteworthy deals include the merger of IDC Architects into CH2M Hill and L. Robert Kimball & Associates acquisition by CDI. Gary Lapera is senior vice president and division manager for architecture and engineering at CDI/L. R. Kimball. He says the reasons for M & A in architecture and engineering are pretty simple and similar to those in other industries.
“It’s all about growth and driving revenue,” Lapera explains. “There are three main reasons to acquire another firm. There is an absolute synergy between what you do and what they do. Another reason is to expand geography. The third reason is to enter a new market. You see an up-and-coming sector of the market and buy a recognized leader in that market.”
GBBN’s merger with EDGE Studio in 2013 was an example of one firm adding to its footprint by merging with another with similar portfolios, although GBBN likely also found the size of Pittsburgh’s healthcare construction market enticing. The acquisition of Paul Slowik & Associates by Architectural Innovations LLC gave an immediate expansion of the latter’s experience into commercial and healthcare markets that it hadn’t worked before. In the case of the Stantec/Burt Hill deal, the synergies between the two firms have proven to be the value added to the resulting firm.
“The marriage has been good. Stantec had things that Burt Hill needed and Burt Hill had things that Stantec needed,” remarks George Halkias, principal and leader of Stantec’s Pittsburgh Commercial and Industrial practice. “Stantec provided a broader platform for me to work with more clients and with our existing clients in more places.”
Halkias says he depends on the networking with Stantec colleagues around the country to gain knowledge he might not otherwise have. He gives an example of the kind of expertise upon which he can lean.
“Because of our size we’ve found we have experts for subject we didn’t know existed. In California, I had a project for a Pittsburgh client that required a study on burrowing owls. I didn’t know burrowing owls existed,” Halkias jokes. “Within the space of a couple hours we found we had an expert on burrowing owls in Southern California.”
A succession-oriented merger occurred in 2014, when local practices Lami-Grubb Architects merged with Glance & Associates.
That deal was unusual for the Pittsburgh market because of the size of the firms involved. In the case of LGA Partners – the new firm formed by Lami-Grubb/Glance – the merger joined a thriving five-person practice with a growing 40-person practice. But the driving motive of the merger was not unusual, given the demographics of architecture.
“That [demographics] is one of the main issues our profession is facing,” says Suzan Lami. “There are a whole bunch of firms headed by people my age who are looking for ways to retire.”
Lami commented on the options she and husband and partner Bob Grubb faced when considering selling or merging the firm. In the end they chose one that was most respectful of the culture they had built, even at the potential cost to themselves.
“The easiest thing to do is to sell to a large firm. When Bob and I started to think about this we had conversations about selling to big firms. I think for an owner, selling to a big firm is quicker and probably brings more money,” she explains. “If you do an internal purchase you don’t get paid up front because your employees usually don’t have the money. But the reason we did an internal transition was because we had such great employees and great clients.”
Lami and Grubb are still just as involved in the new partnership as before. In part that’s because the two are committed to seeing the cultures of the two firms integrate. Lami says the new culture is critical to the continued development of the staff and the retention of clients.
“We have had such loyal clients, some who have employed us for 15 or 20 years. For our clients to have to deal one day with a totally new firm and management wouldn’t be fair,” she says. “The same is true for the employees. A new culture could limit their effectiveness and their happiness. We didn’t want to do that to them.”
Lapera echoes Lami’s sentiment on culture. “Almost everybody will tell you that success is based upon the cultural fit,” he says. “You have to know from the principal level down to the technical people, the architects detailing the projects, that there is a compatible fit. If there isn’t, people leave.”
Asked how to judge compatibility, Lapera allows that there is more art than science.
“You can’t judge it by the balance sheet. You almost have to have a courtship period. There are no pre-nups in M & A,” he chuckles. “At the end of the day you have to have a motivated workforce to make a deal work.” -BG