Design Conference 2005……..Rethinking Practice
Summary of Panel Discussions

Provided by Hugh Hochberg ( hhochberg@coxegroup.com ) of The Coxe Group, with indebtedness to the organizers, panelists, attendees who contributed to create such a rewarding day.

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How we Get Work

1. This panel concerned itself with marketing and related activities that bring projects into architectural offices.

2. Panelists

Richard F.X. Johnson AIA, Matrix Development

· As at-risk, investment grade commercial developers, we focus on how to create value, with value defined as “what it cost to create versus what it's worth in the open market” -- now for us in the range of $240-$275/square foot.

· Current gross rental target is $30.85/square feet.

· Architecture and engineering fees: $6-7/square foot

· Brokers get considerably more per square foot than the design fees, but it's more rewarding in other ways to focus on valuation creation , which we see as a team sport.

· Commodity architecture emphasizes speed.

· The architect needs to understand how we determine value [which applies to every client type].

Alex Klatskin AIA, Klatskin Development

Alex shifted from architecture to development after frequently hearing “…because that's the way the client wants it.”

· We feel the value of the architecture enhances the value of the asset. We truly believe that good design adds value faster than it adds cost.

· As developers/owners of rental property, we want to provide value that our tenants didn't even know existed. We attract high quality (high-paying) tenants because of the quality of the architecture.

· The biggest change today is in how architects are approaching their practices, in particular their attitude toward risk. The only way to avoid lawsuits is to run from the risks, but that means running from responsibility [accountability] …and from control… instead trying to shift it to others. Architects can re-gain control if they get back into the risk business .

· Understanding and dealing with risk brings with it profit potential.

Robert Ambrosi, ARC Properties

· Bob is the owner of ARC Properties and related companies. He is a major developer of a variety of commercial, residential and mixed use properties in the east, primarily in New York and New Jersey.

· In some of our work, we're in a commodity business, which means we work with thin margins, which in turn has moved into design-build.

· Some of our mistakes result from working with architects who didn't understand enough about the project type parameters.

· On other projects, we select architects whose work is “brandable”. Example: Condo project on Rittenhouse Square in Philadelphia for which we hired Robert Stern.

Jim Jones, Skanska

· From a business development point of view, governance is a key issue. How do the partners get along with each other?

· Business development is easier and more difficult in the CM/PM world.

Peter Karp , AIA, University Architect, Cornell University

· We look for exceptional architects for exceptional projects. We, as client , need to advocate for architectural excellence.

· When interviewing for work, please talk about OUR project, not about your work.

· Remember Peter's observations about successful interview techniques, with, again, the emphasis on us (the client) , not on the architect.

· Also note the observation about helping the client think about the future.

Larry Merigi AIA

· We do development because we saw others (developers) making significant profits, partly as a result of our efforts.

· Advice to architects getting into development:

> Start small.
> Select development partners wisely.
> Remember that your best partner might be your bank.
> Look for new opportunities rather than repeating with what others are doing.
> Get involved in the community, because it builds credibility.

3. Additional discussion

a. Regarding the value and importance of architects helping clients look into the future:

· Alex: It's important to work with architects who can “see the future” and see such things as adaptive re-use.

· Peter: We deal with immediate needs, but of value beyond the project are the things where architects stretch us and help us look into the future, beyond the current projects.

· Richard: From an urban redevelopment, we think in terms of 1 plus 1 having to equal a lot more than 2. We need consultants/architects who understand the power of transformative investments. People need to abandon preconceived notions.

b. What is important to you in selecting architects?

· Richard: It varies with the project. I want architects who aren't afraid to answer the tough questions. In particular, don't be afraid to ask about budget.

· Peter: Excellence.

· Alex: The first thing I look for is technical competence (in execution). Then design sensibility. We review architects previous technical documents.

· Robert: We look for architects who have done similar projects in the past. We also look carefully at the individual. A good architect who understands our business will ask the tough, challenging questions. That's what makes such architects a “partner” in our business.

c. Regarding risk…

· Alex: Wall Street drives the commercial development market.

· Richard: Firms who have done well don't avoid risk; instead they work to understand it. For example, our business requires us to set rental rates before we complete the project. We need to work with architects who will deal with the risk in such an approach. They have to be able to design something constructible within our cost and revenue structure.

Note: A contrary view is that the client's assumption of risk has the potential to yield direct financial reward to the client, whereas the architect's assumption of risk – as in a “risky design” – seems to provide only indirect reward that comes through the reputation that the firm might earn.

· Peter: Risk is an inherent part of all exceptional design responses, responses that go beyond the basic expectations. We look for architects who will explore innovative approaches and then convince us of their validity and value.

· Observation on a selling point: Peter commented that Cornell's business school moved in a ranking from 16th to 10th by virtue of its new building.

· There is opportunity for architects to participate via fees in value-added results.

· Getting involved in communities can help to increase the understanding of how planning boards work and make decisions.

d. Fee structure, including relationship of fees and risk

· Peter: We only build buildings at Cornell with new money, which means we're not using our endowment. We have to justify all aspects, including the architects' fees, and that in turns but the burden on those who are raising money to determine how much they will have for the fees.

· Signature architects may command higher fees not for added risk but for the value of the name (and the client's ego satisfaction of working with that architect).

· Robert: Signature architects increase revenues to the client by 20% at a cost increase of 10%.

e. What can architects do to get on the list and be convincing in doing so?

· Peter: To get on our list, nag people like me. That part is relatively easy. At the interview, we limit those who can participate in the interviews to those who will play active roles in the presentation, and we assess their internal chemistry and think about the chemistry between them and us. Remember that the client views all the firms at the interview as competent to do the work.

· Robert: For us, experience in our type of work is important.

· Alex: Get to the point where the clients call you rather than you having to call them. Personal relationships and a body of small good work help to get to the next level.

How we Do Work ... Continue ->