Architect of the future, time to change the business model?

Published on
August 12, 2022
August 11, 2022

The dream or a nightmare?

Being an architect, often shown in movies as an interesting and luxurious life, is still a very popular choice of profession. The PTC has a lot of relationships with AEC companies and we work very closely with a number of them. We think there's an interesting opportunity to change the model, based on project-based outcomes, which would align the interests from both the architectural firm and the client. They would be on the same page...

In research from 2018, through a sample of 2000 teenagers, around 40 of them wanted to become an architect, making it the 11th most popular profession of the survey. But the image of working in architecture seems to be romanticized and, in reality, not quite as luxurious as it seems.

In the UK for example, skilled construction workers seem to earn more than architects. Architects are underappreciated, losing ground to (other) specialists and are often under the thumb of contractors. Not only is the average architect getting less financially compensated than a talented construction worker, but that's also in comparison to other professionals of equal education in fields of comparable importance. Clients are (always) looking to get the lowest fee structure from an architectural firm. What about exploring ways of changing the business model of architecture? Let’s dive into the detail…

Money talks

Let’s go through some statistics of the current situation. According to the American Institute of Architects (AIA), American architects are responsible for designing $600 billion worth of buildings each year of which they get compensated around $29 billion in fees. Fees are commonly quoted as 8% to 12% of the building cost, although survey shows that only 21% of architects achieve fee levels of above 5% while 55% are paid fee levels of 4% or less. A different survey reported fees as low as 2.75%.

Additionally, architects are much rarer than for example lawyers and physicians. The US counts 110,000 licensed architects opposed to 950,000 practicing physicians and 1.33 million lawyers. But the rarity and value of an architect doesn’t show in the paychecks. Architects and physicians have a similar salary start, averaging $58,000, but 6-10 years down the line a medical professional makes 5 to 8 times this amount, whereas an architect has (at maximum) tripled his starting salary.

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In comparison with lawyers, the delta is much larger. Lawyers will start with a salary between $110,000 and $180,000 and will increase this to a range between $271,950 and $391,300!

And the industry is getting leaner and leaner. Due to new technologies, staffing in architecture has decreased with 17% between 2008 and 2016. For the US this means about 22,000 less people to do roughly the same amount of work.

But, this higher productivity isn’t reflected in the salaries, on the contrary, it even drives fees down. Buildings are a basic need (now more than ever), without safe and healthy shelter humanity can not survive. This makes architecture an essential profession, but the way architects are selected and contracted is mostly driven by the lowest fee structure, resulting in inefficiencies and environmentally irresponsible building.

Time for improvement

The success of a surgery isn’t measured by how fast the procedure isn’t completed but by whether the patient is cured. So why operate differently for architecture? Would it not be time to shift the value proposition from selling time to selling results?

Compensation models based on the outcome of the design & construction process and the performance of the building. The architect should then be compensated based on other metrics (ESG, energy efficiency etc)?

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How will this work in practice?

Fast evolving (Proptech) technologies are allowing designers to estimate different aspects of construction more accurately. Costs can be predicted more accurately, like the amount of energy consumption and carbon emission. New digital tools can amplify a designer’s ability to solve complex problems. However, this does demand a change in the architect’s practice and design methods and the willingness to take responsibility for the results of the work.

First, the architect will have to work closely with the other stakeholders & consultants to ensure the client that the basic objectives of cost and schedule conformity are being accomplished.

Secondly, building-performance objectives like energy usage, carbon emissions and even maintenance-cost optimization can be measured. Ultimately, the ability of the architect to realize the purpose of the building can be evaluated by an outcome-based delivery system.

Technology obviously plays a big role in this but is definitely not enough to create valuable ideas. New business models, practice approaches, and the willingness to experiment with definitions of architectural services are necessary to make the new business model work.

We see some form of result-based fees gaining momentum in construction, where architects are getting paid to provide digital data to subcontractors.

If this works out well and continues to grow, the future of the next generation of architects is looking brighter than ever!

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