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Architects’ fees plummet and hourly rates fall

Architects’ hourly rates have dropped for the first time in a decade, while fees have continued to plummet, new figures show

According the latest statistics from the Fees Bureau, sole practitioners are now reporting hourly rates at the same level as in 2007 with sole principals billing at just £70 per hour – a drop from a peak of £75 per hour in 2008/2009.

The ‘fee index’, which calculates the average fee corrected for inflation, has also fallen sharply. The results suggest the ‘real’ value of fees is now lower than 10 years ago.

The index, which breaks down projects by sector, shows that, while average fees charged for an office refurbishment worth £1 million in 2009 would have generated an average architects’ fee worth £65,000 in cash terms, the same building in 2010 would generate an average fee of £59,000 – effectively a 9.2 per cent drop in income.

Total fee earnings by private architecture practices in the UK have decreased by £1.5 billion over the past two years, falling 36 per cent from £4.2 billion in 2008 to £2.7 billion in 2010.

 Aziz Mirza, the author of Architects Fees 2011, said: ‘Now that the RIBA has ceased publication of fee charts these surveys are the only way to update average fees data for construction professionals.

‘This year, commercial and public work has pulled the [figures] down, while private housing is actually higher. But this merely returns private housing to the level it was two years ago.’

In response to the figures, Andrew Pryke, director at Capita Architecture, called on the RIBA to ‘step in’ and set a professional standard of fee bidding. He said: ‘We need clients – and their advisers – to be responsible and not be too short-sighted and see the consequences of a bid that will lead to claims and bankruptcy.’

The news comes in the wake of a spate of accusations about undercutting and ‘suicidal’ fee bids, with some practices reporting rival tenders of 1.8 per cent (AJ 21.10.10).

Andrew Morris, senior director at Rogers Stirk Harbour + Partners said: ‘The architectural profession seems incapable of protecting its core skills in the design and construction of buildings. It is becoming fragmented and is losing control over design continuity throughout the life of a project.’

He added: ‘Through this segmentation of services, coupled with a failure to stand up to cuts in fees, we will – as architects – ultimately lose the ability to influence the quality of the built environment within which we work.’

Neil Deely of Metropolitan Workshop described the ‘enormous pressures’ on practices but warned against optimism. He said: ‘Those practices desperate enough, will make irresponsibly low fee proposals pegged against commitments to quoted RIBA Workstages that cannot possibly be delivered upon.’

Dale Jennings, partner at ORMS, thinks such low fees could even split the profession. He said: ‘More architects will work for the building industry delivering what they want, fewer architects will be able to charge a premium, a decent fee. Architects are very naïve if they think fees will return to the level where they were.’

 

Comment

 

Bob Fry, Europe managing director at Swanke Hayden Connell

Fee bidding is extremely competitive and rates are certainly reduced from 2008/9 ones. Other worrying pressures are demands for more senior level time often at rates a whole grade below given skill levels.

Generally there is too much focus on cost rather than value, and a tendency to invite bids to a variety of inappropriately matched firms which is a recipe for disaster later on. International bidding is even more susceptible to high levels of variability, especially in the ME Region, India and further east.

UK firms will, if they have not already, have to adjust to a more worldly view of bids and rates.

 

Andrew Wood, managing director of Curtis Wood Architects

I am finding clients are less interested than ever before in paying reasonable levels of fees for a good service and good design. I always explain to clients that fees break down into hours, and within reason more time usually results in a better service, a more resolved building, and often reductions in the construction cost, but over the last year or so, and particularly at this point in time, this is falling on deaf ears. We have been actively working to reduce our overheads to survive and to make our fees go further, so we can still achieve a good quality of service, good level of design, and still be proud of our work regardless of the recession. However we are looking at other areas to diversify, like going into construction, offering a greater scope for interior design and product design, and also looking at other areas within the overall project costs – like measured surveys – to try and maximise income on projects. It’s getting harder and harder though, and the work really doesn’t seem to be out there at the moment.

 

Neil Deely, partner at Metropolitan Workshop

There is enormous pressure on practices at the moment and the temptation is to take a very optimistic view of what is possible. Those practices desperate enough, will make irresponsibly low fee proposals pegged against commitments to quoted RIBA Workstages that cannot possibly be delivered upon. There are only two ways that fee proposals like that can be reconciled; first is a reduction in levels of service beyond what is reasonable, sensible or advisable; or second, the practice uses its own financial resources to make up the shortfall and subsidise the client’s project.

Architects have historically had difficulty realising the value of their inputs. This cyclical ‘race for the bottom’ profoundly undermines the ability for profession to ever reach a level of remuneration that reflects the levels of commitment that most architects deliver; but we seem never to learn.

 

Peter Buchan, chief executive of Ryder Architecture

To us, the key is market differentiation and continuing investment in technology and systems to drive efficiencies which allow us to focus on where we can really bring value. Of course it is going to be tough and there are some suicidal fee bids out there. We have to hold our nerve and rely on those clients who continue to recognise value over cost.

 

Robin Nicholson, senior director at Edward Cullinan Architects

The most obvious response would be to move abroad. However, rather than instigating a mass brain-drain of our architectural resources we could reform the role of an architect from that of creating new buildings to focusing on transforming existing buildings to mitigate the effects of climate change. This development in an architect’s job description could add to their worth through increasing the market for their architectural services.

Chris Williamson, director at WestonWilliamson

The graphs certainly reflect our experience. Unfortunately it’s a simple case of supply and demand. We will all need to work smarter over the next few years.

 

Christ Littlemore, chief executive of Archial

Clearly market pressure has increased a depressed market for fee bidding – not only exacerbated by competition between architects – but also when our fees are related directly to reduced construction values, thereby laying our fees open to the prospect of erosion from two different angles. I would urge all in the profession to maintain sense in such matters and ensure that it is ‘value’ that we offer and base our fees upon, rather than just ‘cost’. In this way we will not have to endure unmanageable commercial pressure from each other.

Not least of the value added factors that architects must strive to deliver, is an ability and willingness to think creatively to identify innovative ways of achieving clients’ goals and seeking solutions to their various challenges. For example, at Archial we have been focusing on identifying alternative funding sources and developing dual-use (public and private) buildings, such as our award-winning Carnegie Pavilion at Headingley cricket ground which houses Leeds Metropolitan University’s school of tourism, hospitality and events and converts on match days from a 150-seat auditorium into a 100-seat press box, a co-occupation that dramatically reduces running costs and improves efficiency.

 If practices can align their fees to value rather than cost then, provided they can ‘add value’, architects can reverse both the decline in fees and the demand for architectural services.

 

Simon Charrington, financial director at Donald Insall Associates

Architects need to be careful about using statistical comparison without a corresponding comparison of services actually being sought and delivered;otherwise the profession risks sinking to the lowest common denominator as regards fees only, without any benchmark re: their delivery of real andvaluable professional services.

 

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