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Largest practices make hay

A new performance report shows that larger practices are grabbing the fattest slice of the booming market RESEARCH

Architectural practices are doing well, with their fees rising faster than their workload. The healthiest performance is coming from the largest practices, and it is also the largest practices which are diverging most strongly from concentrating purely on design.

These are among the findings from the latest study of the profession, Architects' Performance 99*, by research team Mirza & Nacey.

The study, which looks at the performance of 400 practices, analyses data collected in February. With total fee earnings for 1998 estimated at £1.7 billion, they have risen 43 per cent year on year. There is typically a 12-month time lag between the movement of workload and growth or fall- off in fees, and at the moment fee earnings are growing faster than workload, which for 1998 reached £64.4 billion.

Large practices have a disproportionate market share, and this percentage is increasing. Practices with more than 11 architects now have 64 per cent of the total market - up from 58 per cent in 1995. Their earnings jumped by 73 per cent in the last three years, from £630 million in 1995 to £1091 million in 1998. In contrast, sole or two-person practices account for just six per cent of fees, even though about a quarter of all architects are sole principals.

The regional share has changed less dramatically, at least within England. In London, for example, the largest market, the share of fee earnings has gone from 38.2 per cent in 1995 to 36.1 per cent in 1998. Figures for the rest of the country are equally stable, with 16 per cent of fees in the South-east, 19 per cent in the Midlands/ East Anglia, and 17 per cent in the north. Outside England, the figures are more volatile. Scotland has more than doubled its market share since 1995, to 9 per cent. In contrast, Wales' market share has fallen consistently over the years from 4.8 per cent to 1.1 per cent, and Ulster's from 2.0 per cent to only 0.9 per cent.

Building design, not surprisingly, is still the dominant form of income, accounting for 72 per cent of the total fee earnings in 1998. But its relative importance varies with practice size. For the largest practices, with 11 or more architectural staff, it represents only 67 per cent of total fee income, whereas for the small to medium-sized practices, design brings in between 82 and 87 per cent of their income.

Overall, planning consultancy represents 10 per cent of total fees earned; feasibility studies 6 per cent; interior design 5 per cent; planning supervision 2 per cent; and expert-witness work 1 per cent.

Expert witnessing bucks a trend in that it is not the largest practices which dominate, but the middle-sized. More than 40 per cent of expert- witness work is done by practices employing between six and ten architects. In contrast, 'interior design' is almost entirely dominated by the largest practices, suggesting that the term is defined rather oddly, since interiors are a mainstay of many smaller practices.

The study also looks at fee earnings in practices, which are frighteningly low at the smaller end. For practices of one to two architectural staff, the median fee earnings are £32,400, with the lower quartile only £16,000 and the upper quartile £56,000. In contrast, practices with 11 to 30 architectural staff have median earnings of £1,208,000 and those with 31 or more architects pull in a median figure of £4,540,000.

Figures are also analysed regionally, an exercise which would only be really useful if one were to cross-reference with the average size of architectural practice. And they are analysed in terms of the fee earnings brought into the practice per principal, finding that the figure is much higher in the larger practices. However, this is also a figure to treat with care. More interesting are the fee earnings per member of the architectural staff (including the principals) analysed against the size of the practice. This shows a steady rise in earnings per architect as the practice gets bigger, from a median figure of £24,600 for a practice with one to two architects, for £62,832 where there are over 31 architectural staff. The message? Big is certainly beautiful if you want to make money.

* Architects' Performance 99 costs £100 from Mirza & Nacey Research, tel 01243 551302, fax 01243 555302.

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