Keeping up with the growth in commercial construction projects has presented both opportunities and challenges for Nevada’s architects. While most firms would like to take on more projects, they sometimes have to turn down jobs because they are understaffed. Growth also causes problems at City Hall by overburdening the permitting departments whose approval is needed to keep architects’ projects on schedule.
At Nevada Business Journal’s Industry Focus Roundtable, representatives of Nevada’s leading architectural firms met at Cili Restaurant to discuss pressing issues in their profession. Connie Brennan, publisher of Nevada Business Journal, served as the moderator for the event. Following is a condensed version of the discussion.
Architects Face Challenges
Connie Brennan: What do you see as the biggest challenge for your company?
Ron Hall: Our biggest challenge is the instability of construction prices. There seems to be a lot of change and price fluctuation without any particular rhyme or reason. Second would be the staffing challenges we all have.
Wade Simpson: Obviously, construction prices are huge, because that determines whether a project goes forward or not. But I would say staffing with appropriate people who fit our culture is more critical for us right now. Our biggest success there has been from out-of-town references – we’re not getting employees from other local firms.
George Garlock: Our biggest challenges are recruiting employees and keeping them happy once they’re hired. We have noticed a huge difference in our ability to recruit employees in the last two years because of the rising cost of living in Las Vegas. The great work climate has helped us recruit employees from other parts of the country, but they have to be able to afford living here, and housing costs are keeping them away. I found out recently that Nevada universities only produce about 10 architecture graduates a year. That’s a small pool, so we’re all forced to look elsewhere to try to find quality people.
Jim Warring: I’m one of the 50,000 people who moved here to Southern Nevada last year. I thought I’d bring two or three people with me from the Cleveland office, but that never materialized because of the issues George mentioned. So we’re learning quickly from experience.
Craig Galati: Our firm has faced some different challenges, principally spreading the word in the marketplace that we’re a different firm than we used to be. We dropped “Architects” out of our name this year. We provide so many other things beside architecture that it wasn’t appropriate for us anymore. We see ourselves more as a consulting firm with a variety of different disciplines. The biggest challenge I think the architecture profession faces is the sustainability of this community. How long can we continue to thrive as prices rise and the precious resources we have continue to diminish? That will affect all of us in this profession.
Derrell Parker: Parker Scaggiari has been an interior design firm, and we recently branched out into architecture in order to better serve our clients and become a full-service firm. We’ve had an awful time trying to recruit people to come in, and we’ve talked to them all over the country. But at the same time, we have been able to find a few, and we had interns this summer from the University of Kentucky.
Howard Perlman: We recently changed our name from Perlman Architects to Perlman Design Group, for pretty much the same reason Craig’s company did. It just seems to be a better description for our firm, because we also do community planning, building design, branding, marketing and other things. I think we’re always going to have a problem recruiting in Las Vegas, and we need a bigger presence at UNLV in terms of the architectural school. The other thing that just has been just a killer for us is this E and O [errors and omissions] insurance, because we do a lot of condos, and the cost is out of sight. As a group, we ought to think about trying to do something, maybe working through the Legislature so we’ll still be in business 10 years from now.
Mark Griffith: Leo A. Daly is a national firm. We’re having difficulty all over the country recruiting and retaining good talent, so it’s not just Nevada. We’ve had a lot of success recruiting from midwestern universities, but it’s still very, very difficult to recruit great talent here. And I agree with Howard about insurance. Our company policy is not to do condos anymore because of the E and O insurance. Fortunately, we have enough other work to keep us busy, but it’s definitely a big problem.
Gary Congdon: We’re having the same problems everybody else is with finding quality staff as Las Vegas goes through a growth spurt. We recently interviewed a gentleman from Oklahoma, a perfect fit for our office. We made him an offer, and he wanted a day or two to think about it. He drove around town looking for a place to live, called me up and said, “I can’t afford to live here.” Like Mark, we’ve shied away from the condo market, but we’re looking at it very, very carefully. If we get into that market, it will be with a good quality developer with local experience.
Joel Bergman: Aside from all of the issues with staffing, I think the biggest challenge is the terribly litigious nature of what we’re doing. Like so many others, I didn’t do condos until very recently when I started to take on a few condo-hotels and some condo projects. I discovered that most of them are not going to get built
anyway, but why give up a design fee? It’s a chance to experiment. God help us if any of the real condos go forward, but the condo hotels are a different and unique structure we helped to develop, and we think we have a safe harbor there. Who knows?
Thomas Schoeman: I think the greatest challenge is when you have too damn much work. You spend all your life looking for the opportunity to work on projects that are important to the community. And now we’re in the environment where we all have more work than we can possibly deliver. How do we maintain our client base? How do we deliver these exciting projects and not have to turn down work we would love to do?
Domingo Cambeiro: The biggest challenge I see in the community is affordable housing. I think the condo trend, converting apartments to condos, has actually hurt the economy, because there is no affordable housing for blue-collar workers. They are funneled into adjustable-rate or interest-only mortgages and that’s how they can afford to buy. We’ll see what happens two years from now when these ARM mortgages come due and they may be upside-down in their financing. I think high-rises will continue to be built in Las Vegas. The cost of construction will continue to stabilize, but never will come down. We would like to see a little more sustainable design in future projects. I think that the infrastructure and the water supply will keep up with growth. Major transportation is going to be a definite need, but we will get there. I feel very comfortable with the future of Southern Nevada.
Qualified Employees – an Endangered Species?
Brennan: The shortage of architects seems to be a national issue. Is anyone recruiting internationally?
Bergman: We are, and it’s going well. I have ties to South America, specifically Peru, so we’ve recruited down there. The problem we’re having with that, of course, is immigration. It’s very, very difficult to come to this country if you are not from Central Europe. It seems like people don’t want more Latinos here.
Simpson: I’ve been able to get some people from Canada, but emigration from Canada is an issue. It takes time and you have to really document and show that the people are needed here.
Schoeman: One answer to the local issue is to develop a reliable network. You can’t advertise for employees – it doesn’t do any good. Networking involves having people within your organization who know other people outside of the organization who may not be happy where they are. My guys get offers every day from national firms that come to Las Vegas and need people, but I think you have to create an environment that’s exciting for your staff, and then they’ll join your company and stay with you.
Congdon: We get calls from headhunters on a regular basis. I don’t know how they get past the screening, but they do.
Brennan: So how do you retain employees? Do they jump ship for five grand a year?
Warring: That’s really an issue. I’ve had to increase salaries considerably just to keep people, because they’ve had competitive offers.
Bergman: We actually gave midyear bonuses early this year.
Warring: We’re going to do the same.
Bergman: And we had four people quit right after they got the bonus.
(Laughter)
Warring: Money’s not always the issue. Architects, in my opinion, appreciate a quality working environment, and the projects we’re working on count, too.
Bergman: Totally not my experience. Brad and I have been training people for years, just to have them go other places.
Friedmutter: I think it has to do with the type of architecture we specialize in, which is the casino business. The reality is it’s a 24/7 business, which puts demands on the architects, and there are no Friday afternoons off. A certain type of person likes that, and another type of person doesn’t like it. No matter how much you pay them, no matter how many banners,
flashing lights, pool tables and other garbage you have in your office, if they don’t like that 24/7 schedule, they’re not going to stay. If you’re fortunate enough to have people who thrive on it, it’s great.
Hall: I just wanted to talk about the issue of the universities being able to keep up with the demand. Recent studies show that over the next 10 years, both for architecture and engineering, the situation is only going to get worse.
Brennan: Does anyone offer scholarship programs to help students get through college? I see seven hands up.
Bergman: We put eight people through college who wanted to learn how to play architecture.
Schoeman: We have a scholarship program for graduating high school kids, and we also give a scholarship to one person at UNLV. We pay 100 percent of the education costs for any of our employees, including tuition and books.
Galati: I think it depends on your business model. If your business model is predicated on growing your firm, you’re going to have challenges finding people. We haven’t had the same problems with finding people, because we’re not out looking for people as much as other firms. We’ve based our business model on staying about the same size as we are now.
Brennan: Does that mean you are turning clients away?
Galati: We turn clients away a lot, but I also have people lined up at the door wanting to work for our company. I believe money is only secondary to fulfilling a passion or a dream. If you can provide a place where people can do that, they will stay longer.
Simpson: This can really be a fun culture. If somebody jumps ship for another five grand a year, they probably didn’t fit in our company’s culture anyway.
Perlman: I’ve found most designers are flighty; they like experimenting, and so you have a big percentage of those people, especially the kids, who want to travel around just to see what they like. And then you have people who are in it for the money, and they’re always going to switch for a couple of bucks.
Permitting Process Causes Frustration
Brennan: Many local governments are having problems keeping up with growth, and the development and permitting process has slowed down. When we talk to builders and developers, they express frustration, but municipalities tell us they’re reaching their goals about 90 percent of the time.
Galati: They must have different goals than we do.
Cambeiro: Obviously.
Congdon: Our experience with the City of Henderson has been that they’re doing a pretty good job of processing plans all the way through from start to finish, through to building permit. They’re doing a good job of hitting their time frames. It seems like Clark County established their goals based on a quick turnaround of drawings, not on achieving a final permit. It’s something they have to take a harder internal look at, rather than having a plan-checker checking stuff as fast as he can to meet an artificial deadline. He may meet his deadline, but we do not have the final building permit at that point because the paperwork has to go back to plan-check again and again.
Friedmutter: We work all around the country, and this is still the best system I’ve ever worked in. If you compare it to the way it was 20 years ago, it’s tougher. But there’s a reason for that: 20 years ago Southern Nevada had three architects and two contractors and the developers were families who had lived in Las Vegas for a long time. Their word was as good as their bond. People would draw something on the back of a napkin and promise to do it that way, and the people in the building department knew they meant it. As the community grew, people came in who didn’t have a track record, and local building departments had to change their policies.
Schoeman: I’d like to reinforce that. This is the easiest place in the country to get a project permitted, although I’m seeing more challenges from a planning perspective than we’ve had in the past. You have to deal with neighborhood groups to get approvals, and there’s a lot of litigation going on with the cities and counties.
Warring: Some of the slowdown in permitting is because the local governments are having the same staffing problems we are.
Congdon: It’s a combination of their staffing problems and the incredible amount of work. There was a day you could walk in with a site plan, a floor plan and an elevation, and you could modify that elevation significantly, and nobody would say “boo” about it. Now, you come back with a change, and it can disrupt the whole process. From the very start, your plans must be much more accurate and representative of what’s going into that project.
It’s Not Easy Being Green
Brennan: Can you explain what LEED certification means?
Galati: LEED (Leadership in Energy and Environmental Design) is the certification process used by the United States Green Building Council. A building gets points in eight different categories and can become certified in those different categories once it’s built. The idea was to provide a benchmark to measure success in creating environmentally-friendly buildings. It costs money to go through that process, to fill out the paperwork and do the checklists and work with the contractor to make sure all the details are exactly right. Most of the clients who come to us want sustainability – that’s why they choose our firm. But I’m really bothered by this whole notion of LEED certification. It doesn’t have anything to do with whether a project is sustainable or not sustainable. You can do a wonderful project that is very sustainable, and yet it might not be a LEED building. All too often those two terms are used interchangeably, but they’re not the same.
Brennan: Are green buildings and sustainable architecture the wave of the future? Are you seeing an increased demand for them?
Warring: Clients want their projects to be sustainable, but not necessarily LEED certified. They’re very edgy about handing money over.
Simpson: They want to save on their energy costs, but they don’t want to pay much up front.
Schoeman: I guess I have a different perspective. Most of our clients want to save operational costs on their buildings, and we’ve found they’re willing to pay for it.
Hall: We see our clients demanding sustainability in their projects. At some point, quality-of-life issues become much more important than financial issues. If we don’t make a change, the key issues won’t be limited to finance. We have to consider health, global warming and other critical issues.
Griffith: There is definitely a push in our organization to be as green as possible. It sometimes comes down to educating the clients. They think it’s going to be expensive to do a certified building. Well, you can still have a green building, maybe not LEED certified, but you can make environmentally sensitive changes without much additional cost to the project.
Bergman: In the private sector, cost has always been an overriding factor, due to escalating construction costs and the unbelievably competitive business environment private companies are in. In the public sector, there’s an impetus to lead in being energy conservative and sensitive to the environment that we very often find lacking in the private sector.
Designing for the Future
Brennan: Before the meeting, Tom [Schoeman] made a comment about architects getting more creative, and projects getting more exciting and out-of-the-box. Let’s talk a little bit about architectural trends.
Schoeman: Several trends in the practice are making things more interesting and creative. As land prices and costs of construction increase, the only alternative developers have is to be more creative – increase the density, increase the height – which challenges architects to be more creative. Most of our clients are no longer looking at a single-use property. They now want mixed uses, and developers are looking to create a place, as opposed to just doing a project. Once you start thinking about an urban center or a large mixed-use development, you need more than architecture; design, graphics and branding become more important to the client. The other change I see is the nature of the work environment. Architects have traditionally been very individual in nature, but now it’s all done in teams, and not just teams of architects. It’s the architects, the engineers, the owner, the jurisdiction; everybody becomes part of that process of delivering a more complex project. That culture where teams of people are working together, as opposed to the star designer dictating what should be done, is very different.
Congdon: I think that may be true for your practice. Your projects have become quite large in recent years. We take on projects in which the client is expecting the principal in the firm to be a major leader. Clients want to see me working on their project and they want to see me out on the job site. They want to talk to me when they call on the phone, not some underling. We’ve made that part of our marketing.
Insurance Issues and Legislative Efforts
Brennan: How are insurance rates affecting your bottom line, and is there anything you can do to control them?
Cambeiro: Insurance is part of overhead, and you figure it into your billings. However, what’s often not considered is the cost of having an attorney defend you against bogus claims. But again, that’s part of business, and we all deal with it. Premiums are going to go higher, and as more condos are developed, more claims are going to come forth, and underwriters are going to show more lawsuits in our zone, and everybody will pay for that.
Friedmutter: The deductible to make your insurance rate reasonable is going to be 10 times more than the insurance rates. And I agree with you, it’s due to the large number of claims being made. But the business climate also plays a part. On the one hand, we’re all being asked to do things more quickly. On the other hand, nobody wants a cookie-cutter project. They all want something unique and different and better than the project next door. But we have to produce it in a matter of weeks, so changes are made more often, and there’s still this imaginary demand for what they call “100 percent complete drawings,” which is ridiculous.
Perlman: You know what it comes down to? If you build a condo project or an apartment project that gets converted to condos, your chances of getting sued within 12 years are 100 percent, not 99.9 percent. That’s the biggest problem our firm faces, because we’ve done a lot more multifamily residential than anybody here. Searching for construction defects has become an entire industry. You can go around with a camera and take pictures of every building in town and find cracks and flaws. That’s just the nature of it. It’s probably not as big a deal as what doctors face with their malpractice premiums, but it’s the same problem.
Friedmutter: Although 99 percent of them are nuisance suits, when you are trying to get a new client one of the questions is, “Have you ever been in a lawsuit?” Now you have to answer “yes” and defend yourself against something that’s a nuisance suit. So it has a negative impact on future business.
Perlman: Getting sued for a condo defect is like a traffic ticket – I don’t think anybody looks at it seriously, because it has nothing to do with quality of work.
Friedmutter: They can make it an issue if they want to.
Simpson: What about what the Legislature has done to control these lawsuits?
Perlman: The Legislature is made up of a bunch of lawyers. It’s their industry.
Bergman: They’re not going to do anything that takes away their livelihood, and their livelihood is strongly dependent on the construction industry and the claims they can make – whether it’s for a construction defect, a design defect, or a dispute between a subcontractor and the general contractor, or the general and owner.
Perlman: Let’s say there is a roof leak in a condo project. The contractor, the roofer, the roofing supply company and the architect will all get sued. It’s the same with plumbing problems or stucco problems. Our name always gets thrown in the hat. Even if we get out of the suit, it may still cost 30 or 40 grand. It’s a pain in the neck.
Schoeman: Nevada is a little better than most states. We do have a right to repair in Nevada, which was a very important legislative effort to help our industry. Not every state has a right to repair. Also, the Nevada Supreme Court recently made a ruling that said if a fault is found in one house or condo, you can’t assume that every unit has it, which was commonly done before the ruling. So the attorneys are kind of upset, but I think it’s good for Nevada. That’s the way it should be.
Congdon: We need to be on the alert for changes in this next legislative session because I’ve heard some rumblings that they’re going to try and make changes to this. We have to take a strong stand.
Brennan: Does your profession have a significant presence in Carson City?
Cambeiro: By nature, architects just go on doing business and they couldn’t care less about politics, and that’s the sad part of it.
Brennan: The contractor’s association has a presence there, and they are trying to lobby to help with things like construction defect litigation.
Simpson: When you look at the fees we get compared to the contractors’ fees, they have a lot more money to spend on lobbying than architects do.
Cambeiro: It’s the golden rule – he who has the gold rules. The contractors and the homebuilders do fund their lobbying efforts well.
Schoeman: The AIA [American Institute of Architects] does participate in reviewing legislation and bringing information to the local chapters and the state chapter if there’s something we should be concerned about. So I think it’s not quite as bleak as some may believe.
