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October 25, 2012

Survey: NAC Architecture

Specialty: Architecture, specializing in pre K-12 and higher education, health care, master planning, interior design, electrical design, bond passage assistance and feasibility studies

Management: Bruce Blackmer, Dana Harbaugh, Helena Jubany, Kevin Flanagan, Steve McNutt, Gary Desmond

Year founded: 1960

Headquarters: Seattle, Spokane, Denver, Los Angeles

2011 revenues:$24.2 million

Projected 2012 revenues: $21 million

Projects: Cherry Crest Elementary School, Bellevue; Renton Secondary Learning Center; PeaceHealth Ketchikan Medical Center addition and alterations, Alaska

Image by NAC|Architecture [enlarge]
Cherry Crest Elementary School is a highly energy-efficient school nestled into its wooded setting in Bellevue. It has a roof-mounted photovoltaic system.

Kevin Flanagan, managing principal of NAC|Architecture’s Seattle office, answered some questions about the industry and his firm for the DJC.

Q: What issues are facing your industry locally?

Flanagan: The lagging economy continues to be a key issue we are facing. NAC’s work is primarily community and public sector projects; while the local economy is showing some recovery in markets such as housing and commercial development, funding remains very limited for public projects.

Indications are that this is starting to change; as people start seeing more life in the general economy they become more likely to vote “yes” on local bond measures and support important projects that have been deferred. There are more capital bond and levy measures scheduled next year than there were in the last two years combined.

Energy-efficient design continues to be another important issue. Energy costs are escalating; design that reduces energy demand resonates both with people who want to see environmentally responsible buildings and with people interested in reducing the ongoing cost of building operation.

Q: Where do you see growth coming from in the next few years? Are there markets your firm is entering or exiting?

Flanagan: 1. Student housing. Universities and colleges can use different funding mechanisms for housing and these provide an additional revenue stream for the schools. Beyond just being dorms, these buildings now incorporate more student life amenities.

2. Health care. Health-care institutions have been dealing with a lot of change recently with Obama Care as well as several mergers and acquisitions locally; health-care projects have been in limbo as clients are waiting for things to settle. In the meantime there are growing needs with an aging population.

3. Senior living. The aging demographic is expected to increase the demand for senior-living projects.

While there are other markets that will also be growing, we are not planning any significant changes in the market types we pursue. We are involved in all three of the markets above and we think we will do best to play to our strengths.

Q: How many employees did you have right before the recession, and how many do you have now? How did your firm do in the recession?

Flanagan: This is a painful question. Firm-wide, we were about 150 people in 2008 and we are now just over 100. Early on we were probably doing better than most because we had some large projects on-going, but as those projects completed, we did not have equal projects to replace them. We took advantage of this time to do some restructuring of our firm, including a merger/acquisition with an office in Denver that brought in some specialized talent along with geographic expansion.

We have learned that now is a great time to build if you have the funding because of the competitive bid environment. Our clients are able to get high-quality buildings with innovative design and energy-saving features for a low bid. We have focused on keeping a high premium on quality and innovative design despite the lean times. Our clients benefit from it and we hope it helps put us in a better place as things recover.

Q: What is the biggest trend in your industry locally?

Flanagan: The biggest trend I’m seeing is that architects are shopping at Value Village rather than Nordstrom. Jokes aside, I would say there are a lot of mini-trends rather than big trends.

Architects locally are remaining agile in how we adapt in the economic landscape. A lot of local architects are doing work abroad or in other regions. Design-build is growing. Integrated project delivery gets a lot of talk, though the industry is still trying to figure out how to use it and still make high-quality design, and how to structure contracts so insurance companies are happy.

BIM is now the way that documents are produced, although again the industry as a whole is still figuring out how to better take advantage of its capabilities.

Q: How was sustainable development affected by the recession?

Flanagan: Ironically, we have seen the recession help sustainable measures for a couple of reasons. First, low construction costs have allowed us to include sustainable features and still remain below budget. Second, our public clients used the projects to leverage capital dollars to save general fund dollars.

School districts saw their general fund amounts significantly reduced; this fund pays for ongoing costs like salaries, maintenance, energy, etc. They are not allowed to cross money between capital and general funds, so a district that passed a bond may have millions in their capital fund but need to make cutbacks to programs to save general fund dollars.

We took advantage of low bids to design buildings that had features like geothermal ground loop heating, solar panels and super-insulated envelopes. The new buildings reduce energy and maintenance costs and save general-fund dollars for teachers and books.


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