For the Interior Design Rising Giants, 2018 looked very different from 2017. Sustainability which seemed to have peaked several years ago and then either leveled off or declined for most firms, had an upward bounce. This year, green design fees rose 6 percent to $139 million, or nearly 1/3 of total fees—plus 85 percent of firms claim sustainability is an important part of design decisions. That shakes out to 29 percent of projects following LEED guidelines, with 35 percent of all square footage and 40 percent of construction and furniture-fixtures ($6.6 billion) being sustainable. Beyond this, the overall forecasts are bullish, but some data points do poke holes in the happy. Each year we ask the Rising Giants if they agree that the economy will be better for business next year. Since 2011, that number averaged 89 percent. This year, only 74 percent agree. Also worth noting: 20 percent more firms than last year see the future economy as an important business issue. So what’s going on? One of the most common words used was “tariffs.” That’s new—and alarming enough to send ripples through the traditionally predictable Rising Giants optimism. So while we raise our glasses to a good year, it’ll be interesting to see how these factors play out in the year ahead.
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Total design fees for the group came in at $504 million, passing the $500-million mark for the second consecutive year. The problem? Fees were down $24 million from the record high of $528 million the Rising Giants logged the year before.
Some red flags shouldn’t be ignored here—more on that in a moment—but before we analyze the bad, let’s appreciate that business for this cohort has been stellar for a decade now. Total annual fees have nearly doubled since 2009, with solid gains every year except 2015, and now 2018.
Was 2017 truly an outlier? Well, it stoked all kinds of confidence. After logging the $528 million, the Rising Giants forecast a whopping $595 million for this past year. That didn’t happen. So what did? An all-around fine business year. Just not a growth year. And even though the group forecasts a sublime $541 million next cycle, as you’ll soon see, confidence may not be what it was a year ago. Let’s look at some numbers.
In the mixed-bag department, the Rising Giants logged 261 million square feet from 16,600 jobs. The footage was down 6 percent but the jobs were up 8 percent. The biggest sector gains came in retail and healthcare along with steady growth in the stalwarts, corporate and hospitality. Corporate still makes up roughly half the total workload, but next year the Rising Giants expect an $18-million jump in hospitality (which would account for half of all expected growth) and a cool $6-million bump in retail.
Furniture-fixtures and construction products showed well at $16.8 billion, up from $14.2 billion last year. The Rising Giants forecast $19 billion next year, but the most interesting number might be the breakdown: Construction products own 79 percent of this total versus 21 percent for furniture-fixtures. Over the years that ratio has been closer to 65/35.
Another ratio that hasn’t budged: New projects versus renovations, which still come in at 60/40 (and have since 2010), but this year we added a new measurement. “Refreshes” of finished projects, which fall under renovation, make up about 6 percent of all projects.
Globalization remains a shrinking, or at least leveling, trend among the Rising Giants. Only 9 percent of firms do work outside the U.S., steady for two years now, but in general decline since 2014. Our data is prone to big swings because of the low international job volume (for example, a big jump in Canadian work last year raised eyebrows, but the number is back to normal levels this year), but work in Asia and the Pacific Rim is down 22 percent over the past three years. Meanwhile, African work has more than tripled in the same time frame.
U.S. work is still the big-ticket item here. The Rising Giants expect the South and West to bring the biggest growth, but Canada, the Caribbean, and Europe still show double-digit potential.
With the decline in total fees came a decline in head count. The group employed 2,725 design staff last year, down by about 100. Salaries stagnated as well, with designers earning an unchanged $70,000 and principals/partners $148,000. Project managers took the earnings hit, with the average salary dropping 8 percent to $92,000. Still, firms expect to bring on another 400 staffers this year.
That is optimistic, of course, and crystallizes what our data tells us this year: Business is not great but it’s good, and the Rising Giants think it could continue to be good.
The second installment of the two-part annual business survey of Interior Design Giants comprises the second 100 largest firms ranked by interior design fees for the 12-month period ending December 31, 2018. The first 100 Giants firm ranking was published in January. Interior design fees include those attributed to:
- All types of interiors work, including commercial and residential.
- All aspects of a firm’s interior design practice, from strategic planning and programming to design and project management.
- Fees paid to a firm for work performed by employees and independent contractors who are “full-time staff equivalent.”
Interior design fees do not include revenues paid to a firm and remitted to subcontractors who are not considered full-time staff equivalent. For example, certain firms attract work that is subcontracted to a local firm. The originating firm may collect all the fees and retain a management or generation fee, paying the remainder to the performing firm. The amounts paid to the latter are not included in fees of the collecting firm when determining its ranking. Ties are broken by the dollar value of products installed. Where applicable, all percentages are based on responding Giants, not their total number. The data was compiled and analyzed by Interior Design and ThinkLab.