Guest Column: Is it Still Possible to Secure a Local Partner Abroad?
- May 01, 2009
By Amy Jakubowski, BBG-BBGMOver the last two decades, the forces that created emerging economies, as well as recessions, provided an impetus for U.S. design firms to diversify globally. In the late 1980s, for instance, the great emerging Asian economies offered relief to U.S. design firms experiencing the fall-out of the savings and loan scandal and the subsequent recession. Eager to establish their cities as global centers of economic activity, developers in China, Thailand, Malaysia and Indonesia were literally desperate for firms who could offer quality design, often for large mixed-use projects encompassing residential, retail, hotel and office components. BBG-BBGM’s own response to this downturn was to set up an office in Hong Kong. A gateway to the booming Asian market, the office gave us a presence in the region and enabled us to forge relationships with developers looking to build large and dynamic projects. We were also able to exercise our large-scale project management skills, collaborating with and leading local architectural counterparts in their creation of contract documents. The scale of these projects sometimes required partnering with several local firms as a single office in order to produce the necessary drawings. This process became more streamlined on both ends, as Asia’s growth continued. However, like all booms, the Asian Miracle of the 1990s came to an end. When the region’s financial crisis hit in 1997, many of the U.S. firms with an Asian presence found it necessary to wind down their local operations. Fortunately, they returned to a recovered and prosperous economy at home, or set their sights on Dubai, where jobs and tax incentives drawing waves of expatriates created a housing boom and where expensive, adventurous design projects abounded. Effects of a global recessionToday’s recession offers no such broad scale global relief. The industry’s ability to cope with recession by diversifying in burgeoning markets elsewhere has been undermined by the nature of our current crisis, which is inherently global. By late 2008, when global liquidity came to a screeching halt, firms lost multimillion-dollar projects at home and abroad—overnight. Many are still waiting for these projects to revive. No better example of this exists than Dubai, where the housing market is now characterized by soaring vacancies and a projected surplus of 87,000 units. At the height of its boom, an estimated 30 percent of the world’s cranes were operating in Dubai. Today, 53 percent of those construction projects—many of them with residential components—have been halted. The foreign-born consultants and workers who’ve lost their jobs have left the city, while buyers seeking second homes have also dropped off. Our own experience in Dubai was to see a 600-unit, six-star branded residential and hotel development put on hold indefinitely over the course of one week in November 2008. In contrast to Dubai, neighboring Qatar, Abu Dhabi and Oman have been able to continue their development, which they conduct in a characteristically careful and calculating manner. Abu Dhabi, in particular, presents a strong need for housing development due to structural shortages. Furthermore, there is a conscious effort on the part of developers, the government and urban planners to make the city livable and to contain oversupply. In addition to Abu Dhabi, regions of cautious activity exist in very interesting areas, such as Oman and inland Chinese cities such as Chengdu. Saudi Arabia’s growing population, combined with a generational shift towards smaller households, will also create the need for more housing. For firms looking to diversify, these pockets may present opportunity; however, the selection process is extremely competitive and many of the firms getting this work are experienced in the international project delivery process. Lessons learnedDespite the global nature of the current recession and the hurdles firms now face to diversify, BBG-BBGM’s own experience during the Asian Crisis offers some insight. While we closed our Hong Kong office in 1999, in the years that followed we continued to devote a tremendous amount of resources to business development in the Asia Pacific region, even when we knew there would be no immediate reward. We wanted to be the first firm clients remembered when they were able to develop again. Developing a relationship with a local partner during a downturn can also be advantageous. Identify which firms could benefit from your residential design expertise and who, in turn, will provide valuable local market knowledge. We recently formed an alliance with Shanghai-based China Construction and Design International (CCDI), the country’s largest privately owned architectural/engineering firm, who approached us to jointly pursue mixed-use and hospitality projects. This represents our area of expertise, while the breadth of Chinese projects on which CCDI has played an instrumental role represents a significant market resource. While the current recession will come to an end, future recessions will almost certainly have the potential to impact us globally. The best way to stay in the global design race is to understand which regions are most likely to arise next, as well as to develop business with and support from clients and local firms with long-range goals in mind. Maintain the relationships through periods of transition. Good people may move around but they are still good people. Finally, as trained designers, our services are a valuable commodity, and the talent we foster in our design-centric cities, institutions and firms will always be a valuable export.Amy Jakubowki, IIDA, LEED AP, is a partner, at BBG-BBGM in New York