Area architects express cautious optimism for growth opportunities

Economic and personnel challenges are tempering optimism for the development industry’s economic growth in 2024, according to the latest local Voice of Architecture survey.

The Tampa Bay chapter of the American Institute of Architects (AIA) conducted the sixth annual survey in February. The organization, which includes 700 regional members, will discuss the report’s findings tonight at the AIA Center for Architecture and Design in Tampa.

Two of the four panelists provided insights into industry trends and expectations ahead of the event. Development attorney Katie Cole, a shareholder with Hill Ward Henderson, expects building to slow compared to recent years.

“There is some chill on the development community, and that’s mostly driven by continued construction costs and interest rate increases,” Cole told the Catalyst. “But the Tampa Bay area is uniquely strong and well-positioned … I would say that while the market might be somewhat slowing down, there is still such a keen interest in development here locally that we’ll still have a positive year.”

AIA believes architects are uniquely suited to provide development industry outlooks, as their work begins years before a project’s completion. Most of the survey’s 124 respondents hail from Pinellas or Hillsborough Counties and agreed with Cole’s sentiment.

While 64% predict demand for architectural services will increase in 2024, that is 20 percentage points below the 2022 benchmark. In addition, 81% believe the development-related economy will be “good” or “excellent,” a 14 percentage point drop over the past two years.

Interest rates

Coles said repeated interest rate hikes over the past 18 months have caused many borrowers to “sharpen their pencils and rework what may have been an easy ‘yes’ in the past.” She does not expect to see a significant reduction in 2024.

“Certainly, nothing that is going to be a huge stimulus to the development community.”

Attorney Katie Cole, shareholder at Hill Ward Henderson.

She noted that projects now adding to St. Petersburg’s skyline were planned and approved several years ago. That “long lead time” underscores the need to keep pace with an influx of new residents, Cole said.

At a recent St. Petersburg Downtown Partnership summit, housing experts blamed a lack of housing construction during market downturns for exacerbating the current affordability crisis. Cole said a development pause or cool-down “is not a good thing at all if you’re a resident needing a home.”

She said many public-private partnerships are now reworking project plans to reflect market conditions. Josh Bomstein, president of Clearwater-based Creative Contractors, faces decidedly different headwinds.

Jobs

His firm concentrates on institutional projects, like schools, hospitals and municipal facilities. While Bomstein has heard that some private sector projects are “slowing down,” he said his marketplace is “still quite busy” accommodating new residents.

However, Bomstein stressed the need to bolster the local construction workforce. He appreciates recent efforts to implement new high school and postsecondary trade programs but believes there is still a stigma associated with those jobs.

“Going into a career in technical-related fields, whether construction or otherwise, is a very practical, economical and profitable thing for young people to consider doing,” Bomstein said.

He explained that an insufficient talent pipeline can increase costs and delay timelines. The development industry is “wholly dependent upon human capacity to put together buildings,” despite some technological advancements.

Bomstein said supply chain and workforce hurdles have forced builders to increase due diligence and project planning efforts. He also credited the City of St. Petersburg’s apprenticeship and mentorship programs.

“The war for talent is real,” Bomstein added. “There’s poaching going on – contractors stealing from one another. They can’t find more good, qualified people.”

Joshua Bomstein, president of Creative Construction.

Other challenges

Bomstein said a lack of regional transit options and soaring housing costs significantly influence employment issues. AIA’s survey showed those two aspects led industry concerns throughout Pinellas, Hillsborough, Pasco and Polk Counties.

Bomstein said a lesser-discussed challenge is dramatically increasing insurance rates. He noted that “puts another pressure on the ability of projects to be feasible” and believes the problem will persist throughout 2024.

He said the development industry must now navigate rising construction, land, insurance and lending costs – much like the people who will occupy their buildings. Bomstein believes that will force project selectivity among stakeholders.

“I think those are the factors in the year ahead that we will all need to watch that will have an impact on real estate developments in the region,” he added.

For more information on the Voice of Architecture event and survey, visit the website here.