COVID-19 and the Arch Viz Industry (March 16, 2020 Update)

UPDATE: MARCH 23, 2020 Update Now Online

As the impacts of COVID-19 continue to impact industries and countries around the world, CGarchitect will be tracking the arch viz industry to provide a reliable and up to date source of information to help everyone make better business decisions over the coming weeks and months.  From March 11-15 we reached out to architectural firms, visualization studios and freelancers from around the world. In total we spoke to or received reports from over 60 companies. 
 

The impacts of COVID-19 are only just starting to be felt and much of this last week found everyone making preparations to work remotely and setting up the systems and infrastructure to facilitate that. 

Remote Working Begins


Almost all of the studios we spoke to had already moved staff remotely or were imminently about to do so. A few that have had long term “no work from home” policies are now struggling to adapt.  Architectural firms seemed by far the most prepared for this. Most of the larger firms have been investing in the infrastructure, hardware and processes to have staff work remotely for quite some time.  We received some reports of networks bending under the remote network load, which has prompted the investigation of cloud based solutions like BIM360.

Many last week were instructing staff to test home network speeds to ensure they could reliably connect to their machines in the offices and effectively communicate remotely.  In countries where internet infrastructure is strong, there appears to be few issues. There have been reports of concerns in countries where internet is not reliable or fast outside of a corporate environment.This means once they are forced to self-quarantine, these studios will have very little ability to work remotely without physically relocating office hardware to employee’s homes. Even then, they face many challenges with sharing data, accessing licenses and internal libraries.  Even in countries where internet is broadly available and fast, there is concern residential/suburban areas will not be able to cope with the abnormal increase in network loads.

For now, the length of time that remote working will continue varies from a projected few weeks, to an indefinite period of time based on what local authorities and governments are advising.
 

Many studios have advised us that their clients are also working remotely and that communications have slowed somewhat.  I imagine this is both a direct response to time being spent moving employees remotely and setting up the infrastructure.  Many also predict efficiency to be impacted and overall productivity will be 50-75% of what it was previously. Undoubtedly employees and clients are spending a great deal of time following social media and the latest news developments, which contributes to this drop in productivity. Many have also never worked from home and this poses its own unique challenges. This will impact everyone in how quickly they can deliver, how quickly new work comes in and the responsiveness of clients.  

From a technological standpoint, we’re hearing most studios are using tools like TeamViewer, Remote Desktop, TightVNC etc. to access their workstations remotely. Some larger studios have invested in more sophisticated systems that use Desktop as a Service (DaaS) or PC-over-IP (PCoIP) like those provided by Teradici. Software licensing has also become a bit more challenging for some studios as well due to centralized license servers. A number of studios reported spending last week sorting those details out.

Many freelancers worked from home already and better understand the challenges that come with that. As someone who has spent much of the last 25 years working from home, both running CGarchitect and working for companies around the world, I can attest first hand there will be other challenges that many have never had to deal with.  Working from home requires a lot more discipline. It is more difficult to “leave” work and communication is always more challenging. You would be surprised how many 30 second conversations happen over the course of the day that keep everyone on the same page, that will not happen as easily when everyone is working remote. Those with families, especially those with younger kids now forced home from school closures, are going to find remote working exceptionally challenging.  Employers are going to need to make accommodations to this new reality and the fact parents are often not going to be fully productive until after normal working hours and the kids have been put to bed. On the flip side, working from home can also be a lot more productive as the usual interruptions and conversations in the office are no longer there and allows for more focus.

Some work has started to hold - but not yet widespread
 

Overall, architectural firms and visualization studios have reported that very little has changed in terms of workload.  Most have been exceptionally busy and continue to receive quotes and book work into the early summer. There are however cracks starting to appear that are impacting others a lot more severely. These impacts generally relate to existing business challenges that are now being further exacerbated and challenges related to freelancers and studios with a lack of client industry diversity and and client geo-location diversity.

Smaller studios and freelancers whose primary business focuses on renderings for architectural firms with mid-market quality were already feeling the pinch from tools like Lumion, in-house rendering teams and outsourcing of rendering work to developing countries with much cheaper rates.  The project delays and holds that are just starting to develop as a result of COVID-19, and the resulting instability, are going to be the final straw for some of these studios and artists already teetering on the edge.

Studios that have a lot of business in verticals directly impacted by COVID-19 are also seeing project cancellations and delays. Most notably work in retail, hospitality, food & beverage, tourism and smaller scale residential. We’ve also heard that a lot of Italian firms that had business from the furniture industry are also being impacted from major industry event cancellations. Many studios are also likely to feel the impacts of the more recent cancellation of the ICSC (International Council of Shopping Centers) event and the postponement of the MIPIM in Cannes, the world's leading property market event.  A substantial amount of rendering work is generated for both of these events and in some cases contributes significantly to studio’s annual revenue. Safer industries are reporting to be healthcare, education and government where the scope of these projects are more difficult to impact short term.

Although many have not yet reported slow downs in work, a number of experienced firms in the industry are predicting we will see slow downs, perhaps in phases, that happen later this year.  Speculation has been submitted that the architecture and construction industry could see these slow downs in late Q2.

We’re also hearing about payments being put on hold and even some clients locking down all spending for at least a month. Most studios I’ve spoken to have 1-4 months of cash to keep the businesses going if all work came to a halt. Some more time if they add in lines of credit or accounts receivable. The latter however, does not count for much if the clients delay or stop paying.

I am hearing from both architectural firms and larger visualization studios, used to pitching in person, that they are experiencing some challenges in making their client presentations remotely.  In some cases there is talk of more reliance on renderings, while others indicating difficulty showcasing physical models, VR experiences and not being able to “read the room” during the presentation.  It will be interesting to see how landing larger jobs is impacted by the new pitching process and how studios and firms adapt. In the short term, we’re also hearing of meeting cancellations and postponements, but I expect much of this is related to the transition to working from home and less the actual cancellation of work.  Many are also moving from in person meetings to online only.


Worried but optimistic
 

Overall sentiment seems to be optimistic, and those who have been through the crash of 2008 have indicated “if we can survive that, we can survive this”. That said, many are concerned about a possible drop in business and what impacts that might have to staff and possible downsizing.  We’re not there yet, but next few weeks and months are going to be very telling of how much of an impact COVID-19 is going to have.

The Takeaway
 

I’m going to editorialize a bit here and use my 25 years of experience in arch viz to point out a few problems I see in our industry and how COVID-19 is going to bring them to light.  As some of you have seen we’re still soliciting feedback for our 2020 Salary Survey. The preliminary results of that survey show 60-65% of the industry came into this field post 2008 (the great recession). Meaning there are a lot of studios and artists that have only ever known the longest running bull market in history. They have only ever known good times with work always coming through the door.  While normally cyclic economic forces trigger recessions and tough times, COVID-19 is and will have a similar impact. It is going to bring to light our industry weaknesses and for many their inexperience.

I asked these questions of people when I posted about the very new workforce to my personal Facebook feed:

1) What percentage of your total gross revenue comes from your best client?

2) What percentage of your total gross revenue comes from your top three clients?
3) What happens if those clients went away?
4) How diverse are your clients (the industries they work, where they are located and the type of work you do for them?

5) How much cash reserve do you have and how many months can you last if work slowed dramatically?

While there are many things that impact an artist’s or studio’s ability to survive a downturn or difficult time, diversity and cash are some of the most important things you should be keeping in mind. 

Another significant problem in our field is a very poor understanding of the worth of what we deliver.  Inexperienced companies competing only on price are going to put a lot of people out of business. Many studios are going to find out the hard way you can not survive long term when your margins are so slim there is no room for generating cash reserves or to re-invest into the long term success of the company.  I have no doubt in my mind we will see casualties in the short term, from those already on the edge, and likely some more later this year or early 2021 due to many of the issues outlined above.

On a more positive note, I want to give some reassurance to those who have built sustainable businesses, but have not yet been through hard times.  You are very likely going to see jobs go on hold, you are going to see a slow down in business and you may have to make some exceptionally hard decisions in your business. This is all normal and this will not be the last time it happens, but you can make it through it.  Many of the top studios today have weathered more than one downturn and each and every one becomes stronger and more resilient each time. You are going to learn a lot from this. My hope is that you will use this knowledge to grow even stronger businesses, a stronger industry and most importantly that you share your knowledge for others to learn from.  A lot of the problems we’re seeing in the industry today stem from too many that do not understand how to build a long term business or establish sustainable business practices. The more people that can share what you should and should not do, the better off we will all be.

Good luck, stay safe and please be sure to message me with any developments so I can report back to the industry.

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Send Us Your Feedback

As we intend to update this weekly or as we see major shifts, we need to receive regular updates from everyone in the industry.  This week we are interested in hearing the following:

1) What impacts are you feeling from COVID-19?
2) Have you started to see any cancellations, pauses or delays in projects? If so, what industries is this happening in?
3) Are the number of quotes and new projects changing?
4) How much work do you currently have in your pipeline to keep you busy?
5) If you are hiring, are your plans being put on hold to bring on new staff?
6) What challenges are you finding working from home? What advice do you have for others?

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
Facebook: https://www.facebook.com/jmottle
Phone: +1 403 410 5911