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Time to step out of Architecture. The recession coming.

JonathanLivingston

So we know its a cyclical industry. I don't know about you guys but I'm starting to see the next one coming. 

The market I am in has housing problems but no one is building condos (liability issues, conversation for another post) the new construction on the market will soon have apartments saturated, already starting to see rent prices begin to stabilize even drop, even though home prices continue to rise. Foreign investment is hitting the breaks because of high construction prices, rising material costs/tariffs are all taking a bite out of the ROI. Speculative design work that is 2+ years down the road is looking less attractive. Is it time? What are you seeing? Just my market? or are these jitters real? 

 
May 11, 18 2:37 pm
Non Sequitur

Def not in my market... we can't get commercial and residential projects build fast enough for demand.  Our concern is the lack of labour (trades to professional) available to deal with the next 10y of construction currently in progress... but then again, I'm not living under Trump.

May 11, 18 3:06 pm  · 
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curtkram

we're seeing developers still interested in residential.  i assume once apartments get saturated, the people that live in the apartments are going to want to go shopping so retail and entertainment will pick up.

May 11, 18 3:08 pm  · 
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Bench

We can't hire fast enough right now, both where I'm at and across our global markets.

May 11, 18 3:19 pm  · 
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mantaray
What metro market are you in Jonathan?

I'm in Chicago and we're seeing big cost increases in wood and steel materials that suppliers are telling us is specifically due to tariffs, first on Canadian lumber and then anticipated on foreign steel. I confess to feeling a bit jittery lately although we are definitely seeing plenty of projects continue to roll in.
May 11, 18 3:31 pm  · 
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JonathanLivingston

Multiple markets on the West Coast

May 11, 18 4:39 pm  · 
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JonathanLivingston

Seattle makes me the most nervous

May 11, 18 4:47 pm  · 
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archi_dude

Step out and into what?

May 11, 18 4:03 pm  · 
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thisisnotmyname

Indeed. All anyone can really do is try to keep their expenses under control and build up a decent cash nest egg to get you through the lean times.

May 11, 18 4:33 pm  · 
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JonathanLivingston

I don't really know.I feel like working in construction would be viable longer into a recession. Maybe something more focused on infrastructure work. Speculative/design stuff tends to dry up quickly. Facilities management, or in house design for a larger company not as directly tied to the market.

May 11, 18 4:38 pm  · 
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thisisnotmyname

You may want to consider in-house positions at government agencies or big non-profit enterprises like hospitals or universities.

May 12, 18 5:36 pm  · 
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Wood Guy

I just switched from design-only to design/build, in part to be better prepared for a downturn. (And also for more positive reasons.)

May 13, 18 10:00 am  · 
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wurdan freo

something more comfortable perhaps???




May 11, 18 4:28 pm  · 
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JonathanLivingston

exactly

May 11, 18 4:32 pm  · 
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Volunteer

The definition of a bubble is that no one sees it coming, or, if they do, they rationalize it away.

May 11, 18 4:56 pm  · 
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thisisnotmyname

Population growth and employment growth are the surest indicators of how a region is doing in terms of the demand for architecture.

May 11, 18 5:19 pm  · 
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If we restrict immigration too much we could trigger a recession.

May 14, 18 10:57 am  · 
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quizzical
Volunteer: The definition of a bubble is that no one sees it coming, or, if they do, they rationalize it away.


Volunteer has it exactly right ... during the 40 years I practiced before retiring I suffered through quite a few recessions and one near-depression. Industry wide it always happened precisely as Volunteer describes.

May 11, 18 8:44 pm  · 
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geezertect

Bubbles make everybody look smart.   When even the stupidest people are making money, look out.

May 11, 18 9:00 pm  · 
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bowling_ball

Maybe it's an American thing (that does tend to affect us Canadians) but we're not seeing it yet. I work exclusively with developers, all of whom are still building at the same pace. We are very affected by the oncoming American tariffs, but buffered because we have more government employment. At least locally, we weren't really affected by the last recession either, though we are now building all apartments and no condos, while even 5 years ago, it was 50/50.

May 12, 18 5:53 pm  · 
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curtkram

who lives in these apartments?  They cost way more than my house.  a lot of them are bigger than my house too.  it can't be young professionals, at least not on what my income was as a young professional.  is it families?  are we going to see a bunch of crying babies and kids running around the swimming pools?  retirees or empty nesters maybe?

May 12, 18 7:29 pm  · 
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a significant group Young professionals (not true for everyone) tend to not have much savings and they are debt burdened by student loans, they can afford 2-3k a moth for housing but they do not have the cash to make a down payment on a condo or house. They want to live a certain lifestyle but also have the ability to leave a city/job market for another without being tied down by real-estate. Some folks do not look at home ownership as a safe means of building wealth anymore.

May 14, 18 11:02 am  · 
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geezertect

Residential real estate has done very well in most markets since the bottom of the Great Recession. If you could have bought in then, you would have made out like a bandit. A house is still the best way of accumulating wealth for most middle class people. You get tax advantages, deferral of capital gains, and of course shelter. Bonds would scare the shit out of me right now.  One big bout of inflation is going to change a lot of millennial minds when it happens.


May 14, 18 2:11 pm  · 
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geezertect

You don't need to stay in the same house for 50 years. As long as you don't move out of area more often than 8-10 years, you still are better off buying than renting. The inflated equity in one house makes the down payment on the next. You have no hope of retiring if you get to 65 years old and you still don't own the roof over your head. Besides, constantly moving across country to chase the mediocre opportunities of this profession is a fool's errand. JMHO.

May 15, 18 7:12 am  · 
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Volunteer

In many parts of the country the tax payments are more that the principal and interest on the loan. A person would be better off in a low tax state at retirement with a small mortgage in many instances. House prices do not always go up, either, as the bust of a few years ago can attest. Another problem is that if you move into an area with very high prices the rent prices will be high also. Still another factor to consider is that if you are working in a high cost of living area and your employer is giving you an adequate allowance for the area your eventual SS payment will be significantly higher. To bounce around in this industry from one miserable paying job to another in one high cost of living area to another is really a poor choice. You would be better off getting a teaching job in a pleasant college town and architeching on the side. Just my opinion.

May 15, 18 8:05 am  · 
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archi_dude

I love these arguments about how millennials don’t want to buy a house. We’d love to buy a house but unless your parents were wealthy or you are in medical sales....it ain’t happening. I can’t justify moving out to somewhere near the 1950 atomic tests just for
ownership.

May 15, 18 8:53 am  · 
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Non Sequitur

I miss the millennial cut off by just one year... Going on 3 years for house ownership and it ain't some developer box in the suburbs. No plans to move either since I'm well invested in the city's future plans. Certainly helps that I had an active role and inside information on the direction of urban developments and public transit.

May 15, 18 9:04 am  · 
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archi_dude

Free school up there right Non?

May 15, 18 9:11 am  · 
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Non Sequitur

Almost free, I think undergrad tuition was under $6k (cad) per semester and grad school $3.5k per semester (3 per year) before scholarships for me. Would have been free if I lived in Quebec, but I don't because that would be terrible. We're about to have an election this summer (provincial) and some are proposing literally free tuition. Same school tuition is now $10k per year undergrad and grad is actually less @ $2.5k. All dollar amounts in canadian currency, so that's like what, 0.60can = 1usd?

May 15, 18 9:28 am  · 
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Volunteer

Some US schools still have reasonable tuition. Georgia Tech is $10,000 (US) a year, for example. Those who want to get ass-raped by the Ivys for a sub-standard education are the ones that asked for it.

May 15, 18 9:39 am  · 
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Non Sequitur

Ricky, I've looked at the Wiki page following my post and I hit about half of the various age descriptions. I've always just remembered gen X from high school and will stick to that... although I despise labels.

May 15, 18 3:24 pm  · 
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Non Sequitur

Ricky, NES generation it is!

May 15, 18 4:00 pm  · 
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urbanity

i am in socal and i work with apartment developers. there was a slow down in the market from fall 2016 until after the tax deal was inked. it has since perked up some.

there are areas that are overbuilt, property costs are high, labor is high and the cost of materials are high. it's taking a lot longer for developers to raise $ for soft costs. interest rates are rising. top banks are starting to divest their multifamily assets to reduce their exposure.

rents are high, luxury properties are having to comp 1 or 2 months of free rent to entice renters. rent in los angeles is stabilizing, only 2% annual rental increase nowadays.

demand for apartments is still relatively strong with a need for housing for regular working class folks. luxury apartments and subsidized affordable housing is about all that's been built around here for the last few years.

i have two large scale apartment projects currently under construction, and a couple more starting construction in the fall as long as the construction funding comes through. doing quite a bit of value analysis at the moment...

May 12, 18 9:04 pm  · 
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randomised

It's always good to step out of architecture, recession looming or not...that Make Architecture Great Again didn't really work out then?

May 13, 18 4:42 am  · 
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null pointer

Bullshit. I'm turning down jobs left and right and have my pick of the crop.


If I could split myself into three clones (2 slaves) with the same brain I'd be a millionaire.

May 14, 18 2:58 pm  · 
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zonker

in a year or two, there might be a recession, and this will result in another culling - I'm preparing for that, so that I wont get pushed out

May 14, 18 4:26 pm  · 
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archi_dude

My experience leads me to believe it’s more a game of musical chairs in production. Whose project is still active has more bearing than who stays the latest.

May 14, 18 9:12 pm  · 
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joseffischer

That definitely seems true at my office. We don't feel close to a recession, but if the client puts a job on hold, it seems to take forever (2-ish weeks) for the higher ups to figure out where to put you. Part of it is they're hoping the project starts back up, another part is mid-tier people not being able or at least not willing to divide tasks and share a project with you. If you're able to handle 3-5 projects at a time, losing one doesn't hurt, but if you're on 1 big project and it stops for some odd reason, things seem to go sideways for you for a month. I'd imagine that this same process (or lack there-of) during a recession would result in multiple months of mid-tier people looking for something to do each week, and the lay-offs would not be far behind.

May 16, 18 2:39 pm  · 
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thisisnotmyname

Yes, and the management people picking who gets laid off may or may not know what the hell is going on in terms of who is actually doing the work. Productive and knowledgeable people often get laid off and the office politicians and ass-kissers get to keep their jobs.

May 16, 18 3:53 pm  · 
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( o Y o )

Pot, meet kettle.

May 14, 18 9:54 pm  · 
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whistler

When the recession hits either head for a government job or a work with a firm who has government work.  Governments typically spend their way out of a recession and government projects have in my experience always been quite plentiful when the private sector starts to tank.

May 15, 18 12:18 pm  · 
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thisisnotmyname

Always be wary of firms that only do one kind of private sector work, places that only do car dealerships, or only hotels.  In good times they prosper and the firm leaders think they've caught lighting in a bottle, right up until the economy tanks. The work dries up and it's too late to diversify into other project types.  Recessions hit practices like that really hard.

May 15, 18 1:07 pm  · 
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OneLostArchitect

Rarely th

May 18, 18 12:37 pm  · 
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OneLostArchitect

Education sector seems to bypass this

May 18, 18 12:38 pm  · 
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zonker

what if all your office does is multifamily in the Bay Area?

May 18, 18 2:30 pm  · 
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randomised

Run Forrest, Run!

May 18, 18 3:50 pm  · 
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zonker
Rick

That's were I came from - Rockstar Games
May 18, 18 4:17 pm  · 
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Scent_of_a_woman

Did you go to architecture school after having a career in the Games industry?

May 18, 18 5:04 pm  · 
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