Interior Designers Cut Staff, Refocus As Fees Fall Again
By NICOLE TAYLOR
Staff Reporter
With business expansion still largely on hold and office tenants preferring to renegotiate and extend existing leases, the interior design sector has seen a second consecutive year of declining billings.
Revenues at L.A.’s 25 largest commercial interior design firms fell by 9.3 percent in 2002 compared with the previous year, according to a Business Journal survey. The decline represents a widening decrease for the firms, which reported a 2.1 percent drop in billings in 2001.
The fall in billings has led firms to lower fees, form new relationships and branch out into new industries to remain active.
Mid-year figures for the largest 25 firms indicate some growth, with billings up 7.1 percent if current trends continue. But the industry is tied closely to business expansion, which remains uncertain.
“We’re cautiously optimistic that things are growing,” said Nila R. Leiserowitz, vice president of global heavyweight Gensler, which reported a modest increase in 2002 over the previous year’s numbers. The firm is relying on its strong relationships with existing clients and its diversity to pull itself through the downturn.
“Everyone felt the downturn in the economy, but it’s hard to forecast with so many unknowns,” she said. “It’s not going to change overnight.”
Employment of design professionals at the Top 25, which hit 10-year high of 613 in 2000, has declined every year since. The most precipitous decline came last year, when employment among the largest firms hit 463, a 15 percent fall from 2001.
Hirsch Bedner Associates, which saw its 2002 billings fall to $7.7 million from $9.3 million the year earlier, has been using its portfolio of hospitality business to leverage office, mixed-use and health care contracts.
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“We’re bringing theatricality into common areas,” said Michael Bedner, its chairman and chief executive. “We’re doing a lot of rehabilitation and broadening the scope of offices, (giving) offices more of the hospitality feel.”
In downtown L.A., for instance, the firm is retooling common areas for Thomas Properties Group’s offices at Arco Plaza by creating a “lounge” effect.
Hirsch Bedner is also relying more on its other offices to provide support instead of replacing designers as they leave. “We’ve sent people to the Singapore and Hong Kong offices during the downturn,” he said. “There is constant movement of staff throughout the organization.”
Hit hard by the telecom bust, Interni Design Inc. has been cultivating real estate brokers as a way to generate business. “We’re working with brokers to either renegotiate a lease for a tenant or relocate them, and that involvement has allowed us to get design jobs,” said President Charles Colosimo.
The local crunch reflects a national trend.
“From designers all over the country, I’m hearing they’ve had to downsize and learn other industries,” said Dan Lee, corporate forum advisor for the International Interior Design Association. “There’s been a retooling in the last 18 months.”
Pointing up the difficulty in the market, five firms from among last year’s list of 25 largest chose not to disclose 2002 billings to the Business Journal, including No. 3 JCM Facilities Planning & Management and No. 10 Nadel Architects Inc.
The most vibrant sectors these days are health care, higher education and government sectors all are generally considered longer-term projects and able to use public funds to support expansions. They have been less affected by the recent downturn.
Leo A. Daly, which specializes in these areas, saw 2002 billings increase by nearly $3 million to $7.9 million, and is on track to exceed that figure this year, according to Jesus Fondevila, its vice president and managing principal. He attributed the increase to a large project at LAX and a pickup in higher education work.
The latter has been funded largely by Proposition A, a $1.2 billion bond measure passed in 2001 that allocates funds to community colleges in the Los Angeles Community College District.
