Assignment # 1 PRELIM

AR 542 – ARCH52S3

The lesson states that architects are very exposed to economic cycles because they get most of
their business from the construction industry, which is one of the most cyclical industries in the
economy. This means that when the economy is doing well, architects are busy and can charge
high fees. But when the economy is doing poorly, architects have fewer projects and must
compete for work, which can drive down fees.
The lesson also shows that the impact of the economy on architecture practice can be seen in
recent economic cycles. For example, the national economic expansion that began in late 2001
reached a peak at the end of 2007. The tail end of that expansion saw healthy growth in the
economy, and with it even stronger growth in most nonresidential construction sectors.
However, at this phase of the upturn, the overall construction sector was seeing more modest
growth. The housing market peaked much earlier in the cycle. The beginning of 2006 was the
high-water mark of the cycle for home building-and declines after that offset gains in the
nonresidential construction sector over the 2006-2008 period.
The 2008 economic downturn severely impacted the construction industry, leading to:

 Plummeting construction activity: Spending dropped from $1 trillion in 2008 to under

$800 billion by 2011.
 Reduced building design: Less construction meant less architecture work.
 Financial pressure on architects: Firms' revenue declined by 40%, leading to job losses.
 Job losses across the board: The economy, construction, and architecture firms all saw
significant employment reductions.
This economic downturn severely impacted the architecture industry, causing a sharp decline in
construction, firm revenue, and employment. The recovery process was slow, with significant
job losses not fully regained even by 2011.
In conclusion, it is essential for architects to understand economic cycles because doing so will
enable them to plan ahead and ensure the sustainability of their firms. Architects should
anticipate a rise in demand for their services during periods of economic prosperity. But
architects should anticipate a decline in demand for their skills during a downturn in the
economy. Architects can ensure that their businesses are resilient and better prepared for ups
and downs by having a solid understanding of economic cycles.