Annual Survey of Greater Boston Architectural Industry Reports Decline in Profits.

Drop Reflects Impact of Real Estate Slowdown

CAMBRIDGE, Mass. -- The 2009 Architectural Survey from CBIZ Tofias and Mayer Hoffman McCann P.C., together the 8th largest accounting provider in the United States, indicates for the first time in several years that the architectural industry in Greater Boston has seen an overall decrease in profit, reflecting a broader trend happening across all industries. The decline began for most firms in the latter part of 2008.

While the study highlights several performance statistics there are three notable trends that emerged:

* The slowdown in commercial building is a symptom of broader industry trends and slowing demand for new and existing architecture projects;

* The overhead rate per direct hour (the cost of operating the firm per billable hour) increased by approximately 10 percent; and

* The average profit level and the billable hours of employees both decreased.

"For three years architectural firms saw record profits, but a major shift occurred at the end of 2008. At that time, the industry suffered a decrease in available project work which impacted profitability and required most firms to downsize accordingly," said David Swan, author of the report and Leader of the Architecture, Engineering and Consulting (A/E/C) Practice. "We anticipate architectural firms will see a decrease in staff and profit levels throughout 2009, and recommend firms monitor their staffing levels and examine profitability levels in order to prepare for all scenarios."

The 2009 Architectural Survey also reported the following trends:

* The average profit level and the billable hours of employees (the ratio of billable project hours to total hours) both decreased. Many architectural firms employed too many staff for their work volume level, which lowered their utilization rate. With less work and staff not busy on chargeable projects, profits decreased accordingly.

* Once firms return to a normal level of project revenues, increasing the billable hours of employees will be the most important determinant in achieving a reasonable level of firm profitability. Historical statistics show a strong correlation between staff utilization and firm profitability.

* The lower work level and the decrease in employee billable hours contributed greatly to the higher overhead and lower level of profitability for firms.

The survey is based on financial information supplied by CBIZ Tofias and Mayer Hoffman McCann's architectural clients based in Boston, and is a representative cross-section of Greater Boston architectural firms.

CBIZ Tofias (www.cbiztofias.com), is a leading accounting provider with offices nationwide including Cambridge, Providence, New Bedford and Newport. CBIZ Tofias operates in association with Mayer Hoffman McCann P.C. - Tofias New England Division, an independent CPA firm, that delivers audit and other attest services. CBIZ Tofias and Mayer Hoffman McCann work seamlessly together to service their clients. Together, the companies rank as the 8th largest accounting provider in the U.S. (Source: Accounting Today).

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