COVID-19 and the Arch Viz Industry (March 30, 2020 Update)

Are we there yet? I’d like to get off this ride now.  I’m sure many of you feel the same. The feedback from this week has come from over 70 emails from around the world and dozens of chats over the last week.  This is most certainly a transition week and is magnifying the repetitiveness of this pandemic.

If you would like to read the reports from the last two weeks, there is a lot of valuable information here: March 16, 2020 & March 23, 2020.

For some you have been in lockdown for weeks already and others your governments are delaying the response to the inevitable.  This is most certainly being reflected in the feedback and the same concerns and outcomes are being repeated over and over again.

There is no constant across the board in what I am hearing, but the patterns are the same.  If you are a small studio or freelancer or your country or the country of your clients are in lockdown, the impacts to your business are more likely to be more severe.  On the opposite end, larger studios that normally have bigger queues of work or have diversified clients around the world, are seeing less impact. That is not to say the concern is not there.  Even if the impacts are not yet being felt, many studios are taking proactive measures to protect the company. That means wage rollbacks, internal spending cuts and in some cases layoffs. I think the expectation is that even if it’s delayed there will be impacts to all.

A possible prediction of the months to come

In these reports I’ve tried to refrain from too much personal speculation, but I feel there is a lot of information that has shown similarities the last three weeks that might allow me to provide some form of analysis.  Keep in mind, things change from day to day and the response from governments and how the virus progresses could change all of this.

Because I am seeing so many similarities between outcomes and the timings of lockdowns, I think between now and the end of April we will continue to see more wage rollbacks and continued layoffs around the world.  As we move into May, layoffs are likely to become a lot more common as studios with smaller queues of work are forced to reckon with liquidity. Come June, all of this will be magnified significantly and I expect we could start to see the bankruptcies of some studios. Certainly not something anyone wants to hear, but I base this on a number of factors.  First, the consistency in feedback and timing of outcomes that have occured in the last three weeks. The fact we know many studios only have cash reserves to last until May or June without making some form of accommodation. And if we use China as the only model of a best case scenario timeline for returning to “normal”, we still have a lot of time ahead of us.  With this in mind, and considering many countries are only a few weeks into what is likely to be a minimum 2-3 months more shut down, I think it reasonable to predict the above. I’ve run this by a number of very long time studio owners in the industry and all concur with this outcome based on the data to date. There are no doubt going to be some very challenging times ahead.

This week in review

As I alluded to above, the industry as a whole is a massive state of flux.  Different countries are in different stages of their responses, and the uncertainty has many clients putting decision making on hold or at the very least slowing down the process.  This is resulting in the majority seeing a reduction in new work coming through the door and the number of incoming requests for proposals. At worst, it’s resulting in a total cancellation of all projects with no prospect of new work coming through, although for now this is still a minority.

From the client side I am hearing equally mixed accounts. Some are happy to explore different ways to market their projects, given the new restrictions imposed upon them, while others that are perhaps more cash flush, will wait things out until things return to normal.  Earlier this week I was able to sit on a call with three of the top real-estate developers in NYC and all seemed to be content waiting until September to start up their new projects again.

When we come through the other side of this, how quickly people are re-hired and how quickly work comes back in the door, will really depend if we see a V-shaped or U-shaped recovery. Meaning, does the work return as fast as it disappeared or do we see a delay in recovery due to other factors?

Some studios are still hiring, but don’t want to proceed until they have better insight into the future, so I fully expect many of those who were made redundant, will have somewhere to land on the other side of this.  Many countries are providing aid for unemployed workers and even business owners, so if you happen to find yourself out of work and you can push through, now will be a great time to brush up on your skills, learn new ones and get your resume/portfolio/CV in order. When the hiring starts again, you’ll want to be ready to run back into production.


What keeps business owners awake at night?

I don’t think I’ve spoken to many business owners in the last few weeks that are not losing sleep at the prospects of what might come, some of the very difficult decisions they have already made and the general stress of uncertainty.  At the best of times, being a business owner is hard and I don’t think you will find many that would say otherwise. Incredibly rewarding at times, but also soul crushing and heartbreaking at others. The biggest challenge for many right now is simply the uncertainty. These are unprecedented times and making business decisions becomes exponentially more complicated when the rules have all been thrown out the window.  Do you take on more debt? How much debt is reasonable? When will things return to normal? When do I need to start making decisions to preserve liquidity (budget cuts, layoffs, wage rollbacks)? How is my team holding up? How are they dealing with this stress? How do I reduce their fears? How do we ensure jobs keep coming through the door? The list goes on. Our clients are all going through the same fears, and everyone is trying to figure out what all of this means. In the interim, these delays in decisions and hesitation in the markets trickles down to everyone.

 

Studios/Freelancers dropping Rates and clients asking for fee reductions

I brought this up last week, but it is worth noting again. PLEASE do not reduce your fees!  The impacts of doing this will be used against you in the future and the entire industry. I understand the pressure people are put under to explore this route, but it’s not sustainable and long term is very unhealthy. If you have a client/potential client that is asking you to drop your rates, explain to them why you won’t do this and why it’s not a sustainable practice. If their budgets are also reduced, then reduce the scope of work they can receive with that new budget. If you normally charge X for five renderings and they only have budget for two, then explain you would be happy to work with them, but you will need to reduce the scope of work accordingly. Maybe you throw in an extra change or two with no charge, but dropping your rates is not the answer. There are many ways you could approach this, but I think you get the idea. 

I am hearing a lot more of this in the last week, so I know it’s already well underway.  Those of you that have opted to proceed despite this warning, well, what can I say. You will personally be responsible for your own downfall and that of this industry.  I have a pretty strong stance on this and would only get myself into trouble if I really said what I think here, but you should be able to read between the lines.

Work from home - will it become the new norm?

I am hearing from many employees that working from home has allowed them to spend a lot more time with family and has reduced sometimes massive commute times.  Some don’t look forward to returning to the old ways of work. Which then brings up the prospect, of when things do return to normal, is working from home more acceptable?  Certainly I don’t anticipate many studios are going to close up offices and have the entire studio working from home permanently, but maybe there is a lot more flexibility in allowing this to happen several days a week. Especially as many of these processes will be perfected over the coming months.  Not only would it be a nice perk that gives a lot more work/life balance, but could potentially reduce studio overheads as the requirement for larger studios would not be required. I’ve heard many architectural firms moved this way years ago and there are a lot of shared desk spaces now. Perhaps our industry takes a page out of this book?  That having been said, the extroverts among us are perhaps suffering a bit more in these scenarios.  

Some light while were in the tunnel

This week I asked everyone to detail two positive things that they experienced in hopes maybe I could end this week’s report on something a bit more positive.

Many have reported a better connection to their teams, their clients and even their neighbours.  Clients are more interested in the personal lives of the people they are working with and overall everyone is a lot more forgiving and accommodating.  Funny that it takes a pandemic for us all to take inventory of these things and for all of us to be a little bit nicer.
 

This time away the office, even for business owners, has provided time to think about the bigger picture.  To reassess what is important, to make more time for family and to think about how they might do things differently when we come out the other side of this.
 

Those with more time are spending time learning new skills, volunteering where they can, reconnecting with friends, brushing up their portfolios, working on internal studio projects that often got neglected and spending time refreshing the marketing materials that long since went out of date. For those in the northern hemisphere, many are  also looking forward to being able to enjoy more of the summer.
 

I think we will have some very interesting changes in our industry in the coming years.  Changes to work from home policies, new studios who now understand what it means to go through a tough time, and very likely impetus and knowledge to build far more resilient and sustainable companies. After 2008, we saw a lot of unfortunate negative changes, but also a much more robust industry as well. I fully expect our industry to do the same once we get through this.

Connect with the Industry - A social experiment

This is a bit of a social experiment, but I want everyone who reads this to reach out to three people in the industry they have lost touch with, have not spoken to in a while, or even someone you’ve always wanted to speak to, but never had the courage to speak to.  Check in with them, see how they are doing. I don’t want this to be a “pitch your services”, but just a way for us all to connect and find out a bit more about each other. As we all self-isolate around the globe, now more than ever, we need to come together as a community. In the next report, I want to hear how those conversations went and what came of them.  And no, I don’t mean spill the gossip. Just let me know if it was worthwhile and if you learned something new or made a valuable connection.


The Next Report  / Send Us Your Feeback

To give everyone a bit of a rest, myself included. I am going to move to reports every two weeks unless I see a major change occur within the industry. Please be sure to report back with any changes as they are happening on your end. For the next report, here are the new questions:

1. What has changed for you since the last report?
2. What are you hearing from your clients and what changes have taken place to your volume of work and quotes?
3. What measures have been taken by your company as a result of the impacts of COVID-19?
4. Tell us how reaching out to three industry colleagues went?  
5. What non-COVID-19 things have you seen in the industry that made you smile or were a refreshing change from the non-stop bad news? (i.e. Image, news update, Video, software news etc.)

As always, information shared with us is always done in full confidence and we will never identify our sources.

Please reach out to me at:

Email: jmottle@cgarchitect.com
Phone: +1 403 410 5911