Completion of large, design-led millennium projects means architects' fees will only grow 5% this year.
THE decline in big ticket millennium projects has already hit architects says a new report, which notes that fees will rise only 5% this year after a 20% surge in 1999.

The report, by Manchester-based research firm Market & Business Development, says that architects should therefore emulate the commercial approach taken by US practices such as Gensler and HOK that have set up in the UK.

In particular, the report warns architects not to repeat the mistakes of the early 1990s recession, when some firms sacrificed margins to retain staff.

The rise of design-led millennium schemes in the late 1990s saw total fees jump to £1.66bn last year, the report says, but it adds that this is not sustainable.

The customer base is likely to restrict the potential of architects to improve rates

from report on architect fees

Fees are expected to hit the £1.78bn mark this year but are not expected to grow more than 3% annually from now until 2005. The report says this is primarily because of price sensitivity, which will continue to hit margins, rather than because work is drying up.

The report states: "The power of the customer base is likely to restrict the potential of architects to improve contract rates significantly in the medium term." The slowdown in growth is expected to hit private commercial and industrial new-build markets in particular. Both are expected to drop 4% next year, before recovering.

The report emphasises the significance of the commercial market, despite the one-off nature of the millennium. The report says: "This sector is likely to remain the largest for architects throughout the forecast period and represents some of the most profitable project potential in the whole industry."