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Architect-Developers: An Example of Vertical Integration in the Design and Building Industry

U. S. architects have responded in various ways to the economic downturn that currently plagues the country. Some architectural firms have released staff proportionate to the loss of workload, while others have found work in other industries. A select few have refused to accept the meager quantity and quality of projects that are available to them and have begun to create projects for themselves by taking on the traditional role of the developer.

While this appears on its surface to be a big leap for a profession that has seen its scope of services narrowed by related industries over the past several decades, early adopters have reported that the jump was actually less of a hurdle than you might anticipate. Architects have long been key players on development teams, regularly coordinating design and construction efforts (along with the CM/ general contractor) right from the earliest stages of the planning process. Many have also been involved in preparing schematic planning documents, crafting opinions of probable construction costs, and coordinating environmental investigations and reporting. The enhanced role of architect-developer folds in additional consultants including experts in upfront due diligence tasks and financing specialists. The largest hurdle of this expanded role for the traditional architect is most likely to be the process of procuring financing through investors and lending agencies. But those early adopters advise that this should deter motivated architects from pursuing this endeavor.

Here are a few generally accepted “pros” and “cons” of the architect-developer business model:

Pros for Architect-Developers:

• Control (or a higher degree of control) over project design, schedule, and scope.
• More flexibility to implement progressive strategies (sustainability, urban livingexperiments, etc).
• Less reliance on outside economic factors and swings in building “booms”.
• Provides a more visible platform for architects to promote profession and share talents.

Cons for Architect-Developers:

• Increased financial risk.
• Potential reliance on equity partner / funding source.
• Modern segmentation of professions will likely require multiple licenses/registrations/insurance policies to operate design and development business.

If this business model is of interest to you, we recommended that you consult with a couple of professionals in the development and contracting arenas to find out more about the “ins and outs” of their industries and opportunities for a hybrid architect-developer in your region.