Top 100 Interior Design Giants

The leaders of the interior design pack have just concluded one of their best years ever.

Judith Davidsen -- Interior Design, 1/1/2001

THE TOP 100 INTERIOR DESIGN GIANTS began the millennium with some very nice numbers, beginning with $1,441,712,161 in interior design fees, an increase of 21.1 percent over last year and almost twice the projection. This was only the second time in the past ten years that fees increased more than 20 percent.

Interior design accounted for 100 percent of income for 17 Giants and five percent of income for one Giant (who nonetheless made it into the top third); the average was 58.4 percent. Sixty-three Giants expect the ratio to remain the same, 18 expect it to rise, 14 expect it to dwindle, and five are not making any predictions at all.

Interior design, understood strictly as the creation of environments, accounted for 77.23 percent of fees, followed at a great remove by purchasing and specifying, strategic planning, master planning, facilities management, feasibility studies, furniture design, consulting, lighting fixture design, carpet design, and textile design; also making it into the mix were project management, programming, client representation, graphics, move coordination, relocation management, and software development. The role of traditional practice is expected to slip about half a percentage point, while the planning specialities-strategic, master, feasibility-are expected to rise, along with furniture design, facilities management, and consulting.

New construction accounted for an average of 62.1 percent of interior design; 92.1 percent of the work was U.S.-based, and 7.9 percent overseas.

In the accompanying chart of design fees earned per project type, "other" refers to research and development, communications, airports, automotive, consulting firms, convention centers, data centers, mission-critical facilities, manufacturing, libraries, media, justice, mixed-use, preservation, stadiums, and yachts.

Top Giant project costs totaled $28,231,164,083 for furniture, fixtures, and construction, with $2,750,000,000 the highest figure for an individual firm, and $185,311,930 the median. The grand total represented a 23.5 percent increase over the previous reporting cycle, almost twice what had been forecast, and the third highest in the past ten years. With 87 giants reporting, a 14.5 percent increase is predicted for next year.

Square footage totaled 464,184,947, a drop of almost 25 percent from last year, the second such drop in five years, indicating perhaps that the Top Giants have devised a way to spend more and earn more while producing less; work in non-traditional design specialties does not begin to account for the figures, nor does inflation. An increase of 13.5 percent is forecast for next year.

Average project costs per square foot were highest for restaurant front of house, followed by residential, hotel public spaces, hotel function rooms, and retail; at the high end the order is somewhat reversed: function rooms came out on top, followed by public spaces, restaurant front of house, residential, and, tied for fifth place, offices and retail.

The highest average furniture and fixture costs were found in restaurant front of house followed by residential, hotel public space, function areas, and restaurant back of house. Function areas led at the high end, followed by a tie between public spaces and restaurant front of house, residential, restaurant back of house, and offices.

On average, the Top Giants are given unlimited scope on furnishings on 43.2 percent of their jobs, flexible standards on 28.6 percent, and corporate standards on 28.2 percent.

The Top Giants earned an average of 90.7 percent of their fees as sole designers, up 2.7 points from the previous year, with a corresponding decrease in the roles of lead and consulting designers; 39 report that all of their income came from projects where they were sole designer, and one reports being lead designer on all projects. On average, 56.8 percent of fees derive from multi-project work for single clients, up slightly from the previous year. An equal number of Giants-20-expect multi-project work to increase and decrease, with some of the projected decreases quite severe.

Repeat clients are most likely to be in the corporate field, followed by finance, hospitality, health care, retail, education, entertainment, government, residential, technology and new media, museums and galleries, transportation, research and development, automotive and petroleum, manufacturing, pharmaceutical, private clubs, sports, yachts, and malls.

Fifty-six of the Giants moved into fields new to them: the highest report was for technology and new media, followed in descending order by hospitality, retail, residential, education, entertainment, offices, health care, government, museums and galleries, laboratories, finance, transportation, data centers, mission critical, multi-family, assisted living, preservation, consulting, and libraries.

At least some of the time, 67 Top Giants calculate their fees by the square foot, 54 by a percentage of project cost, and 36 by the hour. The figures do not add up to 100 because 29 of them use two methods and 21 use all three. On average, private clubs command top dollar when fees are calculated as a percentage of project cost, followed by residential, restaurant front of house, entertainment, and airports; on the high end, restaurant front of house is followed by residential, retail, a tie between offices and restaurant back of house, and financial. When figured by the square foot, restaurant front of house leads, followed by technology, retail, entertainment, and health care medical areas; the high end starts with a tie between retail and finance and works down through restaurant front of house, a tie between hotel public spaces and guest quarters, a tie between health care medical and administrative areas, and hotel function rooms. Education tops hourly fee schedules, followed by offices, retail, restaurant front of house, and health care administrative areas; residential tops the high end of the hourly list, followed by restaurant front of house, a three-way tie among offices, retail and financial, and a four-way tie among hotel public spaces, guest quarters, function areas, and administrative areas.

As usual, billing preferences do not match actualities: 37 Top Giants would rather bill by the hour, mainly seeing the method as the most realistic; 21 opt for percentage of project cost, seen as the most lucrative method, especially as the costs of materials and construction rise; 17 favor a flat fee or lump sum (to be paid in advance, according to one Giant) that reflects design value rather than project size or cost; 15 would choose the square-foot method, finding it the easiest to calculate; and two would elect a mix of methods. One preferred "anything other than the AIA standard contract."

Fees earned per employee range from a high of $736,170 to a low of $43,648, with a median of $164,151. Contrary to expectations, only 26 of the highest earners are ranked among the top 50 Giants, with another 24 of them scattered among the lower 50.

Only two Top Giants-both ranked in the top half-bill 100 percent of their professional time. The median is 85 percent, the minimum 60 percent. Again contrary to expectations, most of the lowest billers are ranked in the top half of earners.

Sixteen of the 100 Top Giants pay commissions to firm members who bring in non-hospitality jobs, with most commissions based on the project fee, followed at a distance by a set amount; other bases include project profitability and "varies." Six of the sixteen are ranked in the top half of the Giants.

The Top Giants expect to hire 1,229 new interior design employees, 66 percent more than had been projected. The figure includes 54 principals, 291 project managers and directors, 460 designers, 182 CAD operators, 6 manual drafters, 27 marketing and business development people, and 97 unspecified "others." Of the 787 employees who left last year, 74 are known to have gone to other firms, 33 left the design profession, 32 went to allied professions, 10 left the area, five opted to stay at home, four opened their own firms, three joined client firms, and two returned to school.

The most popular recruiting tool is the Internet, followed by advertisements, referrals, word of mouth, recruiters, schools, career fairs, professional organizations, networking, and head hunters. Some firms offer a bonus to employees who lure in new blood.

Ninety-six of the Top Giants carry professional liability insurance, with an average coverage of $3,250,000 and a maximum of $15,000,000, and an average deductible of $84,000 and a maximum of $500,000. Clients are still not very likely to cover or contribute to premiums, but those who do tend to be involved in large-scale projects, condominiums, architectural projects, engineering projects, hospitality, health care, build-to-suit, casinos, clean-room projects, commercial projects, institutional projects, seismic renovations, entertainment, research and development, high tech, joint ventures, mixed use, owner/user, renovations, retail, schools, developer work, municipal work, offices, one-of-a-kind developments, and projects that require coverage above the amount a firm typically carries.

Ninety-eight Top Giants use the Internet for product research, 96 for client communication, 93 for materials and technical research, 90 each for recruiting and sharing drawings with clients, 89 for researching prospective clients, 88 for communication and drawing sharing inter/intraoffice, 85 for marketing, 82 for sharing drawings with contractors, three for sharing drawings and otherwise communicating with consultants, one for housing databases, and one for conferencing. Seventy-two of the firms expect to increase Internet use, with upswings seen in marketing and project management, followed by research, websites for projects, client communication, intraoffice communication, recruiting, file sharing, and project collaboration. Ninety-seven of the Top Giants already maintain websites of their own, with the heaviest uses in marketing and job posting.

Walk-through computer renderings are very important to 25 percent of the Top Giants and somewhat important to another 59 percent.

Thirty of the Top Giants (compared to 13 during the previous reporting cycle) find increasing opportunity in hospitality work, while fully one-quarter of them see technology and communications growing, with another three finding new openings in technology-one in Greece. Twenty-one think corporate has a rosy future, and ten see new potential in such non-traditional design specialties as strategic planning, repositioning, and owners' rep services.

Retail shows promise for twelve Top Giants, education for eleven, health care for ten, residential and high-rise residential for nine, finance for six, assisted living for five, and casinos and entertainment for two each.

Geographically, the region most frequently mentioned as opening up or growing was Europe, cited 14 times with an emphasis on hospitality and retail in Eastern Europe. Asia-last year's top choice-followed with 12 mentions, with special mentions for India, Korea, and Singapore. The U.S. East Coast received 11 mentions-five in technology, two in the D.C. metro area. The South received 10 mentions, two in Florida, and the West Coast nine, five for technology.

Fifteen Top Giants see diminishing returns in hospitality, with specific note made of Atlanta, the Midwest, and the Northeast. Technology rates 14 mentions, including a sector referred to as "Dot Bombs." Retail, including chains and department stores struggling to position themselves in the market, are named by 8 Giants, as are office work and health care. Finance is cited by seven Giants, non-traditional services by three, and government and senior living by two.

Eight of the Giants feel Asia is saturated or on hold, while six believe this of the U.S. East Coast, five of the U.S. Central States, four of the South (three single out Georgia), and two each the U.S. Southwest and South America.

Twenty-six Giants plan to open new branch offices, the largest number in California, and those mostly in the San Francisco area. The Southeast follows, mainly in Atlanta and in Florida. Other offices are slated for the D.C. metro area, Seattle, Phoenix, Toronto, Chicago, London, Dubai, Milan, Minneapolis, New York, Colorado, New Jersey, and Mexico. The reason most cited was client need, but the need for larger space and/or cheaper rent was also a factor.

Offices are closing in New York, California, Minneapolis, Virginia, London, Saudi Arabia, and South America. The major reasons were moves to larger quarters, consolidation, and completion of projects.