The Architecture Industry Is Adapting to Economic Turmoil

How is the current multifamily market slowdown impacting the design and planning process? Veteran architect Kevin Newman weighs in.

Kevin Newman, the CEO & creative director of Newman Garrison + Partners, was introduced to the built environment by his father—a residential real estate developer—but his knack for drawing drove him toward building design.

“I decided to take drafting classes in high school, which is what I consider the beginning of my career in architecture,” he told Multi-Housing News. Fast forward about 20 years into his career, he became a partner at a Newport Beach, Calif., studio. In 2005, he eventually acquired and rebranded the firm into what is now Newman Garrison + Partners. Newman is a passionate advocate of design beyond aesthetics, the type that improves the quality of life for the people who use it.

With today’s economy creating persisting ripples across the built industry, MHN asked him to expand on how the planning and design process is affected.

Newman Garrison + Partners CEO Kevin Newman on how the current economic landscape is the architecture industry

Architects are coming up with creative solutions to the problems caused by the economic slowdown, according to Kevin Newman. Image courtesy of Newman Garrison + Partners

The economic volatility has considerably reduced the number of new multifamily developments, among other property types. How has this slowdown impacted the design and planning process, and the architecture industry overall?

Newman: It has been a whirlwind year for the AEC industry, as ongoing supply chain issues, labor shortages and bank failures have all impacted development timelines and, ultimately, the rhythm and pace of our work. As a result of these economic headwinds, fewer projects are entering the construction documents phase. As such, most of our work this year is focused on the design and entitlement phases, which provides the opportunity to lay strong foundations for future projects.

I anticipate that developers will begin pushing projects into the construction documents phase next year and that in 2025-2026, we will reach the levels of active construction last seen in 2021.

Despite these challenges, certain sectors are still experiencing growth and demand. As diversification is a top priority for me, I am using this time to focus on expanding NG+P’s portfolio both by asset class and geographic location. Take the Dallas-Fort Worth metro, for example, where housing demand remains strong due to the area’s rapid growth and abundant employment opportunities. We are working on a handful of luxury multifamily properties in that market to meet that demand.

Additionally, with the increase in travel post-pandemic, the hospitality industry is on the rise once again. NG+P has recently been selected as the architect of record for an exclusive luxury resort in California, further diversifying our portfolio.

READ ALSO: Top 10 Markets for Multifamily Construction

What concerns do you hear most about from your developer clients?

Newman: Currently, the primary concern that we hear from our developer clients is related to project financing. A slew of factors, including 11 consecutive interest rate hikes and multiple regional bank failures, have resulted in hesitancy from traditional lenders to transact. Lenders are being more judicious with their investments and the cost of capital has increased, leaving many developers with projects that have stalled until they can secure a capital infusion.

To give you an example, one of our developer clients has met with several lenders and is still struggling to secure the proper financing to move the project forward. However, I do remain optimistic that traditional lending practices will resume in due time and construction levels will rebound over the next 24 months, which has the potential to lead to an influx of new housing supply over the next three to four years.

How do these economic challenges affect your clients’ commitment to sustainability and green building practices and, hence, your design process?

Newman: Sustainability and green building practices are, unfortunately, being adversely affected by the ongoing economic challenges. As project budgets decrease due to the strain of lending, sustainable design choices are ultimately being impacted, and in some cases, deprioritized. But, as architects, we have a long-standing commitment to sustainable building practices.

Even though economic challenges can shift our design process, architects are great at solving problems, and as such, we come up with creative solutions in these circumstances. In doing so, we closely consider factors like cost efficiency, regulatory incentives, market demand, resilience and longevity, energy costs, innovation, risk mitigation and future-proofing to inform our strategic recommendations.

Are there other ways in which the turbulent economy is affecting the design process?

Newman: Construction costs remain notably higher than pre-pandemic levels, partially due to the price of materials. While the exact cost of materials will differ based on geographic location, it’s our job to identify creative design solutions and source more economical options, especially as developers look to minimize their construction costs to move projects forward.

In response to this challenge, we are specifying materials that are locally sourced, recyclable and durable—such as stone, bamboo or reclaimed wood. This is not only less expensive, but it also plays an integral role in decreasing project expenses, minimizing the development’s carbon footprint and increasing projects’ longevity.

The Q Variel

An aerial view of The Q Variel, a 241-unit luxury mixed-use development in Woodland Hills, Calif., an architectural design featuring an expansive rooftop deck. Image by Juan Tallo, courtesy of Newman Garrison + Partners

Which regions/markets are you most active in these days? What fuels demand in those areas?

Newman: Newman Garrison + Partners is currently most active in Southern California, where we’re designing primarily multifamily and mixed-use projects. Mixed-use developments, in particular, have been on the rise over the last decade, but the pandemic has sent this demand into overdrive. We’re seeing a heightened interest in a mixed-use environment across Los Angeles, with residents enjoying the convenience of concentrated, walkable retail options right outside their door. In a more general sense, Southern California is an economic hub with endless employment opportunities. That, combined with its agreeable climate and cultural and creative scenes, will continually fuel demand for this area.

In addition to working in Southern California and the Dallas-Fort Worth metro, we are also active in two major developments in Boise, Idaho. Idaho has experienced explosive growth in the past several years amid an influx of new arrivals from California and the Northwest. While the current economic climate has slowed activity in the market, the area boasts an incredible lifestyle, great climate, reasonable cost of living and natural beauty, which contribute to Idaho’s appeal.

Do you plan to expand to new metros? Where and when? How do you prepare for these expansions?

Newman: Yes, expanding into new metros has been a primary focus of mine. The Sun Belt is a promising region of the country as it is experiencing a construction boom, with a record-high of nearly 980,000 apartment units currently under construction.

In preparing for any new project, we spend much time truly understanding every market we work in, especially when entering a new metro. Before we put pen to paper, we research what the area needs, what has recently been built there, how to build in that market and how to cut costs. All that research informs our design and ensures that we are striking a careful balance between designing a building that is right for both the developer and the community.

Tell us about some projects you’re currently working on, or recently finished working on.

Newman: Our newest project is Millennium PQ, an eight-building, 331-unit mixed-use campus nestled in the wooded hillsides of San Diego’s Rancho Penasquitos neighborhood. We had the privilege of working with one of the country’s leading green developers on this project and, as such, had the opportunity to incorporate an array of outdoor amenities, open spaces and landscaped areas that respect the neighborhood’s environmental needs. Construction crews are putting the finishing touches on the development right now and we anticipate completion in September.

We are also actively working on five projects located within blocks of each other in Los Angeles’ Warner Center neighborhood, which is actively turning into a thriving downtown featuring multifamily living, shops, retail and office. We are designing over 1,400 units across five luxury mixed-use buildings that blend luxury urban living with a resort-style atmosphere. Two of the five projects—The Q Variel and The Q Topanga—have already opened their doors, and the third development is currently under construction.

The Q Topanga

The Q Topanga seen from Topanga Canyon Boulevard. The project’s design includes a three-story glass section that houses most of the building’s amenity spaces. Image by Juan Tallo, courtesy of Newman Garrison + Partners

Not too far away from Warner Center is Simi Valley, where we designed a transformational mixed-use development comprised of 280 apartments as part of the re-imagining of an adjacent existing retail center. The project will offer both market-rate and low-income housing options, as well as 8,000 square feet of lifestyle amenities, creative office space and an expansive half-acre park open to the public. This development is slated to break ground in the first quarter of 2024.

Finally, to elaborate on some of the work we are doing in Idaho, the project that introduced us to this market is Seasons at Meridian, a 360-unit residential development located about 10 miles west of Boise, in the city of Meridian. We wanted to pay homage to the area’s agrarian roots, so the exterior building design and materials are inspired by a modern interpretation of traditional farmhouse architecture. That style is apparent across the development’s 10 apartment buildings, which are arranged around an open-air courtyard space that aims to create a neighborhood feel with dedicated areas for recreation.

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