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Page 1: Foresight Report 2017 - AIA Professional

1

Global perspectivesIntroduction United States A/E/C The Big PictureMarketplace trends

Market sector trends

Operations & talent Finance Hindsight Technology Sustainability Design trends

References & resources

Foresight Report2017

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Global perspectivesIntroduction United States A/E/C The Big PictureMarketplace trends

Market sector trends

Operations & talent Finance Hindsight Technology Sustainability Design trends

References & resources

Contents

Summary insights 3

Operating environment 4

Business of architecture 10

Hindsight 23

Professional practice 25

References & resources 34

Published April 2017 by The American Institute of Architects 1735 New York Avenue, NW Washington, DC 20006 aia.org

© 2017 The American Institute of Architects

All rights reserved.

Report prepared by

DesignIntelligence

As architects, we are facing tremendous challenges. The economy and construction activity have rebounded from the Great Recession, but aspects of our future are cloudy and many challenges surround us: global unrest, political upheavals, climate disruptions, urbanization, and disparities in social equity.

At the same time, we see opportunity and good cause for optimism. Technology innovations are integrating our physical and digital worlds. Advancements in software, business and mobile tools, in building products, and cloud-based communications, will change profoundly how we work. Architecture firms are applying new business practices. Firms are diversifying their client bases, creating innovative contractual arrangements, and expanding into new service areas and markets.

We must invest in public infrastructure and our nation’s communities. We need thriving centers with schools, parks, libraries, and public buildings that improve quality of life. Architects are at the heart of helping to create stronger and better communities—and, indeed, building a more prosperous world.

This latest report in our Foresight Initiative turns our environmental scan into a format that is digestible at a detailed level, with handy snapshots to extract.

At a macro level, it offers observations and the implications of trends. We also see the value in hindsight lessons. In a special two-page section, we share how some firms prospered during the Great Recession—using smart business practices that will help them navigate inevitable future downturns.

The Foresight Report is at its core a tool, a resource the profession can use to create more forward thinking strategic plans. Foresight planning includes taking data, such as those in this report, and contextualizing them for your firm. AIA’s expanded Foresight web page also contains complementary resources, such as the 2015 Foresight Workbook and a PowerPoint version of this report. Access those resources at aia.org/foresight.

We thank our long-time partner in foresight, DesignIntelligence, for the expert analysis reflected in this report. The AIA is committed to providing actionable business intelligence to help the profession find success. We hope that you find value in this work and in our other studies. We cannot predict the future, but these resources should make it easier to navigate.

A message to AIA members and readers:

THOMAS VONIER, FAIAPresident

ROBERT IVY, FAIAEVP/CEO

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Global perspectivesIntroduction United States A/E/C The Big PictureMarketplace trends

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Summary insights from DesignIntelligence

It follows that the balance we approve of in architecture, and which we anoint with the word ‘beautiful,’ alludes to a state that, on a psychological level, we can describe as mental health or happiness.”

—Alain De Botton, Author of The Architecture of Happiness

01 > WHAT THIS DOCUMENT IS FOR

The Foresight Report scans the environment of architectural practice in order to provide members of AIA with a deeper and more useful understanding of the context in which they practice. Its intent is to provide architects in practices of all sizes with a broad view and a perspective above the trenches of day-to-day professional practice. From the environmental scan, readers can find topics of interest to explore further and find new connections between events and their own practices.

The report is comprised of information from public and private or proprietary sources, as well as insights from subject matter experts and industry thought leaders.

The Foresight Report is not meant to make predictions of what will happen in the future, nor is it intended to cover the entire breadth of trends facing the profession or society at large. However, it can be an invaluable aid in strategic planning and decision-making by helping readers develop scenarios of how the context of professional practice and business are changing.

02 > HOW THIS DOCUMENT IS ORGANIZED

The Foresight Report is divided into three major sections. Each discusses trends and insights that affect the practice and business of architecture on varying scales and with different areas of focus:

• Operating environment: A survey of information and trends that set the context for the practice and business of architecture, placing special focus on economics and geopolitics

• Business of architecture: A look at trends and events related to winning work (including trends and changes in key markets), managing talent and operations, A/E/C finance, and more

• Professional practice: Key issues that affect practice (e.g., technology, sustainability) don’t solely come from the business side, yet they can still create issues and shape opportunities

03 > ABOUT THE REPORT

AIA’s Foresight Report is the product of a partnership between AIA and DesignIntelligence, and was authored by DesignIntelligence. Founded in 1994, DesignIntelligence is a research, publishing, and business networking firm that is focused on improving the performance of A/E/C and design organizations worldwide. DesignIntelligence convenes the Design Futures Council.

04 > OTHER AIA RESOURCES

The AIA has produced a number of other resources for practitioners and firm owners who wish to better understand the changing landscape of architecture business and practice.

• Firm Survey Report 2016: The Business of Architecture (available at aia.org/firmsurvey)

• Client Insights: Data That Drives Business (available at aia.org/clientinsights)

• Diversity in the Profession of Architecture (available at aia.org)

• AIA 2030 Commitment Progress Report (available at aia.org/2030)

• AIA’s Resilience and Adaptation Initiative (visit aia.org/resilience)

• AIA Knowledge Communities (visit aia.org/knowledge)

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Operating environment

Global perspectivesChange and challenge: global economics and geopolitics

United StatesOverviewEconomy at-a-glance

A/E/CA/E/C industry outlookAIA Firm Survey highlights

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Change and challenge

Rapid evolution

The dominant theme on the global scale is change. Trends highlighted in prior editions of the Foresight Report, including shifts in global capital as well as uneven and sometimes sluggish economic growth, continue to play out and make their consequences known.

In addition, significant changes in the geopolitical landscape, including the rise of extremist organizations and political populism, the decision of U.K. citizens to leave the European Union, choppy financial markets, large-scale migration, and sometimes difficult changes in national leadership add to the environment of uncertainty.

As governments, businesses, and individual citizens make their way through the rapidly evolving landscape, some will see the changes as threats to a comfortable status quo while others will see considerable opportunity.

Only one thing is certain: Change is likely to remain the dominant theme for the foreseeable future.

01 > POPULATION FLOWS

Key facts from the United Nations on international migrants (people who change their nation of usual residence

for any reason):

• 244 million worldwide in 2015

• Between 1990 and 2015, global total increased by over 91 million, or 60%

• 3.3% of the world’s population

• Nearly 58% live in more developed regions

• Women comprise 48% of global total

According to the global nonprofit IDMC, internal displacement has increased dramatically in the Middle East and North Africa since the Arab Spring uprisings in 2010 and the rise of the Islamic State (ISIS). In 2015, there were roughly 4.8 million new displacements, which is more than all other regions of the world combined. Yemen, Syria, and Iraq accounted for more than 2.4 million of the global total.

Population flows have challenged humanitarian, political, social, and economic systems worldwide, and will likely continue to be a major factor in elections and policy-making in the years to come.

02 > GLOBAL CAPITAL GROWTH

The International Monetary Fund (IMF) projects global growth to slow to 3.1% in 2016 before recovering to 3.4% in 2017. The forecast reflects a more subdued outlook for advanced economies following the June 2016 Brexit vote and weaker-than-expected growth in the United States. These developments have put more downward pressure on global interest rates and are likely to inspire a longer period of accommodation in monetary policy.

SOURCE: IMF

04 > GLOBAL NATIONAL SECURITY SPENDING (2015)

$1.76 trillionSOURCE: STOCKHOLM INTERNATIONAL

PEACE RESEARCH INSTITUTE (SIPRI)

05 > YEARLY DEATHS FROM GLOBAL TERRORISM 2010-2015

~30,000 a 500% increase since 2010

SOURCE: IPT

03 > COUNTRIES CHANGED HEADS OF STATE OR SENIOR-MOST LEADERS BETWEEN 2015 AND 2016

121SOURCE: U.S. STATE DEPARTMENT

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Eight of the top 10 container ports, as measured by throughput of twenty-foot equivalent units (TEUs), are in China.

SOURCE: CIA

Despite sluggish performance in recent years, seven of the 10 most competitive global economies are located in Europe.

SOURCE: WORLD ECONOMIC FORUM

According to the World Economic Forum, the U.S. is the third most competitive global economy behind Switzerland and Singapore.

SOURCE: WORLD ECONOMIC FORUM

The top three growth economies (projected 2014–2018):

Peru (5.4%) Columbia (4.7%) Chile (4.0%)

SOURCE: BROOKINGS INSTITUTION, FOCUSDATA

By 2050, the working age population (ages 15–64) in sub-Saharan Africa is projected to reach 1.25 billion, which is triple its current amount.

SOURCE: IMF

India is the world’s fourth largest IT start-up hub with more than 3,100 tech startups in 2015 alone.

SOURCE: FORBES

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01 > SEASONALLY ADJUSTED CONSTRUCTION SPENDING 2010–Q3 2016 SOURCE: U.S. CENSUS BUREAU

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

VALUE OF TOTAL CONSTRUCTIONVALUE OF PRIVATE NON-RESIDENTIAL CONSTRUCTION

0

2006 2008 2010 2012 2014 2016

MIL

LIO

NS

OF

DO

LLA

RS

02 > DESIGN LEADERS BULLISH ON AMERICAN MARKET

In a recent DesignIntelligence survey, 63% of A/E/C firm leaders surveyed felt that the U.S. market would be positive for architecture, design, engineering, and construction business in the coming 10 years.

63%Bullish (Positive)

34% Neutral

3% Bearish (Negative)

United States

Overview

Despite years of sluggish recovery from the Great Recession, as well as the onset of a charged political environment, the United States remains an essential player in the global economy and one of the most sought-after places to invest and do business.

Like the wider global context, America is undergoing change in many aspects of its society and economy, and the effects on the wider environment for architecture remain to be seen.

03 > SOCIAL CHANGE: THE AMERICAN FAMILY

The share of American adults who have never married is higher than it has ever been, complementing decades of declining marriage rates. Two-parent households have declined from 87% in 1960 to 69% in 2016, and roughly 17% of kids in the U.S. currently live in blended families.

Americans are ambivalent, though: While nearly half of two-parent households have moms and dads working full-time, 51% of Americans say children are better off with a mother at home.

SOURCE: PEW RESEARCH CENTER

04 > NEW DEMOGRAPHICS

By 2055, the U.S. will not have a single racial or ethnic majority due in large part to immigration. Hailing mostly from Latin America and Asia, almost 59 million immigrants have come to the country since the middle 1960s.

In 1965, approximately 5% of America’s population was foreign-born; in 2016, approximately 14% of the population was born outside the United States.

SOURCE: PEW RESEARCH CENTER

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04 > COMMERCIAL BANKRUPTCIES Average year-over-year (2015 to 2016)

+2.4%SOURCE: AMERICAN BANKRUPTCY INSTITUTE

Economy at a glance

05 > S&P 500, 2009–Q3 201601 > 2014–2024 TOP 10 INDUSTRIES BY PROJECTED EMPLOYMENT GROWTH (JOBS ADDED)

The Foresight Report is divided into three major sections. Each discusses trends and insights that affect the practice and business of architecture on varying scales and with different areas of focus:

1. Construction (790,400)

2. Home healthcare services (760,400)

3. Nursing and residential care facilities (735,700)

4. Food services and drinking places (658,000)

5. Offices of physicians (522,700)

6. Local government educational services compensation (426.4)

7. Employment services (424,800)

8. Computer systems design and related services (408,900)

9. Hospitals/private (394,900)

10. Offices of other health practitioners (352,300)

SOURCE: BUREAU OF LABOR STATISTICS

06 > UNEMPLOYMENT RATE, YEARLY AVERAGES 2006–2016 SOURCE: BUREAU OF LABOR STATISTICS

20162015201420132012201120102009

20%

15%

10%

5%

0

-5%

-10%

-15%

-20%

03 > INFLATION 2016/all urban consumers (Based on Consumer Price Index)

1.3% avg.

02 > U.S. GDP IN Q4 2016 (Real growth of 2.1%)

$18.9 trillion

SOURCES INCLUDE: WORLD BANK, U.S. BUREAU OF LABOR

STATISTICS, U.S. CENSUS BUREAU, DOW JONES

5.3 4.9

0

2

4

6

8

10

9.3 9.68.9

8.1 7.46.2

2009 2010 2011 2012 2013 2014 2015 2016

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Industry outlook

Into the future

Since the recovery of the construction industry began in 2012, the profession of architecture has continued to rebuild itself to pre-recession levels. In the intervening years, practitioners of all levels have proceeded with cautious optimism. Recent successes have allowed many firms the opportunity to reinvest and grow stronger, positioning themselves to seize opportunities and persevere no matter what direction the future takes.

01 > HIGHLIGHTS FROM THE AIA FIRM SURVEY REPORT

In 2016, the Institute published the AIA Firm Survey Report, offering insights on firm performance and trends in the business of architecture. Key findings from the report include:

Multidisciplinary practices on the rise One striking trend from the survey is the rise of multidisciplinary firms—those that offer architecture and at least one other discipline. In 2005, two-thirds of respondents described their firms as single-discipline architecture firms, only half did so in 2015. Only 29% of firms in 2005 described themselves as multidisciplinary; 10 years later that ratio had increased to 42%.

Billings near 2008 highs In many ways the profession of architecture has recovered from the worst of the Great Recession. Net billings from architecture firms reached $28.4 billion in 2015, which is very near their $28.5 billion peak in 2008.

Profitability increases give room for investment The percentage of firms that have reported a 10% or higher profit has increased from 35.4% of respondents in 2013 to 49.1% in 2015. Greater profitability has allowed firms to reinvest in themselves and their staff—in many cases addressing lingering issues caused by the downturn a few years ago. However, not all firms are so fortunate; one in 10 report that they ran at a loss in 2015.

Nearly all younger firms are small; larger firms gain sizable portion of staff and fees Fully 45% of all firms were founded in 2000 or after, but only 8% of large firms (50+ employees) fell into that category. Though only 5% of the total, large firms employ 47% of staff and garner more than 51% of fees.

Firm diversity increases While still underrepresented in professional practice, the number of women in 2015 grew to 31% of people in licensed and unlicensed architecture roles, which is an increase from 26% in 2005. Minorities also made significant gains during that time frame. The percentage of architectural staff in the category grew from 16% to 21%.

Get the report aia.org/firmsurvey

02 > ADDITIONAL ARCHITECTS NEEDED 2014–2024

~7,800SOURCE: BUREAU OF LABOR STATISTICS

04 > REAL ESTATE TRANSACTION VOLUME PREDICTED

$475 billion in 2018 (down from $534 billion in 2015)

SOURCE: ULI

03 > GLOBAL INVESTMENT IN ENERGY, INFRASTRUCTURE, MINING, AND REAL ESTATE-RELATED PROJECTS

$6 trillion in 2013could reach $13 trillion in 2030SOURCE: MCKINSEY

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The Big PictureThe drive to collaborationBusiness integrating with design

Marketplace trendsConsumer trends & preferences

Market sector trendsRetailResidentialHealthcareWorkplaceEducation

Operations & talentHuman capital trendsMotivating the generationsDiversity and equity

FinanceFinance trendsMergers & acquisitions

The Business of Architecture

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The drive to collaboration

We need to develop and disseminate an entirely new paradigm and practice of collaboration that supersedes the traditional silos that have divided governments, philanthropies, and private enterprises for decades and replace it with networks of partnerships working together to create a globally prosperous society.”

—Simon Mainwaring, Founder of We First

01 > CONSTRUCTION: THE NEED FOR COLLABORATION

The construction sector, which represents a huge portion of the U.S. and global economies, is rife with waste that can undoubtedly be helped through authentic collaboration throughout the design and delivery process. A recent study from McKinsey & Company shows that the typical large project in mining, infrastructure, and oil and gas construction runs 20% over schedule and 80% over budget. Construction productivity has not kept pace with overall economic productivity, which has led to uneven returns for contractors.

Big buzz

Collaboration has become a genuine buzzword that pervades many disciplines, including design, business, nonprofit, and education. It can seem as though most of the world spends its energy in a coworking utopia, engaging seamlessly with clients, peers, and delivery partners.

Reality is sometimes a different matter. Authentic collaboration is not always as easy as it seems, and many firms in A/E/C remain in their traditional silos.

Failure to fully collaborate cannot be blamed on a lack of tools. Software products, such as Dropbox, Basecamp, Slack, Kona, GTeam, Google Drive, Collaboration for Revit, and many more, help distributed and cross-functional teams to share files, jointly manage projects, and coordinate activities. Many software options are available for mobile platforms that extend the reach of participants as they use technology to work together.

Collaboration can fail if any of a number of factors are missing, including trust, communication, organization, and common vision. As technology provides greater reach for architects to work with clients and delivery partners in different locations, professionals will need to master an array of skills and tools—as well as develop organizational cultures—that can take advantage of the opportunities that collaboration brings.

02 > COLLABORATION: GUIDING INSIGHTS FROM DESIGNINTELLIGENCE

Collaboration is one of the key focus points of DesignIntelligence and the Design Futures Council, which hold up three key guiding insights in forging genuinely collaborative relationships:

1. Inherent to the idea of collaboration is mutual benefit. Yet far too many enter collaborative efforts without predefining the benefits and addressing the “why” of the collaboration.

2. Collaboration requires intentionality. Such intentionality will find its footing in well-articulated policies and processes with clear and mutually beneficial governance over it all.

3. Collaboration is a team sport that is best played when more participants are included. That is to say, the core ethic of effective collaboration is inclusion.

Hindsight

Integrated project delivery (IPD) in spirit but not form

5%Percentage of billings earned through providing IPD services (2015 responses)*

Despite significant buzz five years ago or so, IPD seems to have failed to live up to its initial promise of revolutionizing how design and delivery partners worked together. However, anecdotal evidence from DesignIntelligence research suggests that firms feel pressure—often from clients—to collaborate more with delivery partners to improve time frames and project economics.

*SOURCE: AIA 2016 FIRM SURVEY REPORT

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Business integrating with design

02 > DESIGN FIRMS ACQUIRED BY NON-DESIGN COMPANIES SOURCE: #DESIGNINTECH REPORT/KLEINER PERKINS CAUFIELD & BYERS/JOHN MAEDA

Businesses have continued to incorporate design into their cultures and offerings by acquiring formerly standalone design firms, providing more evidence of their increasing appetite for design. Though not yet a big part of the phenomenon, architecture firms may find themselves sought after by nontraditional M&A partners.

Design thinking and beyond

Since they began appearing in business literature more than a decade ago, the words “design thinking” have been repeated so often as to obscure their original meaning. Despite overexposure, however, the concept continues to fascinate fields as diverse as business and education.

As recently as September 2015, the Harvard Business Review dedicated its cover to design thinking, and business schools as different as the Darden School at the University of Virginia and Philadelphia University have embraced design thinking in their curricula. Companies like IBM have embraced design thinking as a service area and core capability.

The love affair between business and design shows no signs of abating.

01 > STARTUPS

27 Startups co-founded by designers have been acquired since 2010 by companies like Google, Facebook, Adobe, LinkedIn, Dropbox, and Yahoo.

SOURCE: KPMG

The significance of design in business is ballooning. Over recent years, the field has become a darling of large corporations, even those who traditionally don’t have design interests. Now some are responding in a more traditionally corporate way: procuring standout design firms through mergers and acquisitions.”

—Nathan Hurst in Wired

2011

Facebook

acquires Sofa

Globallogic

acquires Method

Google acquires

Mike & Maaike

Facebook acquires

Bolt Peters

Facebook acquires

Hot Studio

Accenture

acquires Fjord

Oculus/FB acquires

Carbon Design

Google acquires

Gecko Design

Capital One acquires

Adaptive Path

Facebook acquires

Teehan+Lax

BBVA acquires

Spring Studio

McKinsey acquires

Lunar Design

2012 2013 2014 2015

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Consumer trends and preferences

Consumer paradox

Consumer choices are a key element in the health of the American economy, and experts pay close attention to shifts in spending patterns that might indicate trends.

Consumers are showing the paradoxical drives toward hyper-customized, instantaneously acquired purchases (products and services) while also showing an appetite for sharing resources and evolving their ideas of ownership.

While many still buy goods in bricks-and-mortar locations, consumers seem to have a growing array of options for satisfying their needs and wants. All of this means continued disruption for businesses that seek to satisfy the changing desires of consumers worldwide.

02 > SHARING ECONOMY: ALIVE AND THRIVING, OR DEAD?

Many say that collaborative consumption, also called the sharing economy, is not only alive and well, but is a growing sector that will have a tremendous economic impact. They cite now-established companies like Airbnb and Uber as evidence that people are changing their idea of sourcing and owning services and products and are willing to become a web of providers.

Sarah Kessler, writing in Fast Company, disagrees. She insists that the sharing economy umbrella has widened inappropriately to include businesses whose models are more traditional and do not reflect the intent of true sharing economy pioneers. These pioneers, who are now often defunct, sought to share common items that were underused.

01 > HYPER-CUSTOMIZATION + 3D PRINTING

As the means of production and delivery change (usually driven by technology), consumers tend to expect goods and services to be increasingly tailored to their expectations. The near ubiquity of mobile devices brings marketing messages directly to the consumer and advanced data analytics allow marketers to customize marketing messages based on a consumer’s prior purchase patterns.

Creating the products themselves on demand would provide purchasers the ultimate in customized products and dramatically change all stages in the consumer goods supply chain.

3D printing is the much-hyped vehicle for fulfilling that promise, and novel examples of its use continue to pop up. Eyewear company Bawsome, for example, uses Materialise’s 3D printing factory to provide fully customized, made-to-order glasses.

Despite hype and predictions of its indispensability, 3D printing has been adopted somewhat unevenly in the architecture community. While many firms use 3D printers for model-making, many report limited usefulness However, as the technology continues to develop, wider application could emerge.

03 > THE SHARING ECONOMY IS EXPECTED TO REACH

$335 billion by 2025 and a PWC report found that 24% of service providers in the sector are aged 55+.

SOURCE: CNBC

04 > CROWDFUNDING IS PREDICTED TO REACH

$96 billion by 2025 half of which is expected to come from China.

SOURCE: THE GUARDIAN

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Tech

Experience

Traditional Retail

Culture

Evolving Retail Model

Westfield Corp., the $27.7 billion global shopping behemoth, has created Westfield Labs in order to redefine the complete shopping experience from planning the trip to parking, dining, and receiving goods purchased.

Westfield’s plan is to reinvent its 35+ shopping centers throughout the world.

The Samsung 837 Store on Washington Street in NYC carries no inventory but attracts customers through a combination of ultra-hip events and features such as a gourmet coffeehouse and cafe, live streams of product announcements, and a viewing party for the Oscars.

Amazon opened its first bricks-and-mortar bookstore in Seattle. The 5,000 volumes it stocks are based on online sales data and the retail location will likely feed data into the company’s online strategy.

Macy’s and IBM Watson have teamed up (through developer Satisfi) to create Macy’s on Call, an AI-powered mobile shopping assistant that allows shoppers to use natural language to find where specific products, departments, and brands are located, as well as learn what services and facilities can be found in a given store.

Retail sector

Beyond “bricks & clicks”

Few market sectors have seen more technological and cultural changes than retail, which is redefining itself to remain relevant. According to the ULI and PwC Trends in Real Estate report for 2016, “The conversion of function in retailing—namely, on-floor selling to order fulfillment—is a dynamic characterized by stores shifting from ‘showrooms’ to ‘web rooms’ to ‘guide rooms.’”

The evolving retail model seems to be based in fusion. The exchange of goods and services is morphing and combining with other types of interactions, technologies, and categories.

Concurrent with these shifts in the retail model, retailers, developers, architects, and designers are trying to define the role that the physical environment plays in this new shopping paradigm.

The model is changing as new technologies allow people to bring the purchase of the product that satisfies their need closer to their first perception of it. And this makes the perception of the need—rather than the shop—the stage that marketers need to control.”

—Werner Reinartz, Author of Customer Relationship Management: Concept, Strategy, and Tools

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Residential sector

According to the National Association of Home Builders (NAHB), housing starts averaged 1,164,250 housing units in the first five months of 2016. Economist Bill Conerly, writing in Forbes, predicted that housing starts are unlikely to reach the historical expectation of 1.5 million units per year, citing a lack of population growth as the main factor in lower housing demand.

Factors to watch in residential construction: Continued movement toward urban environments and consequent changes in housing prices and affordability in the cities; improvements in the economy that allow millennials to establish households and some couples to divorce; aging baby boomers; and influence of multigenerational housing and demand versus supply in the multifamily market.

01 > AGING, BABY BOOMER STYLE

With 10,000 baby boomers turning 65 each day, designers of all types are working on the challenge of housing a healthier, longer-lived generation that will likely redefine societal ideas of aging.

Students are among those working to address this near-future social and demographic dilemma. The University of Arkansas Community Design Center recently took up the challenge in a project sponsored by the NEA. Their Third Place Ecologies initiative found ways to modify single-family houses in Freeman, South Dakota, to the mobility, access, and social needs of the community’s seniors.

02 > HOUSING THE MILLENNIAL FAMILY

Millennials, or those born between 1981 and 1997, have overtaken baby boomers as the largest generation (Pew Research).

According to the National Association of Realtors (NAR), the largest group of recent home buyers are millennials. Despite the hype of millennial preference for urban, mixed-use environments, more Gen Y homebuyers are looking to the suburbs as their needs change and families grow. NAR chief economist Lawrence Yun: “Even if an urban setting is where (millennials would) like to buy their first home, the need for more space at an affordable price is for the most part pushing their search further out.”

03 > MILLENNIALS SOURCE: URBAN LAND INSTITUTE

21% live at home with parents/older relatives

14% live in multigenerational homes

62% believe they will one day own a detached, single-family home

04 > ARCHITECTS DESIGNING HOUSING SOURCE: AIA FIRM SURVEY REPORT 2016

Percentage of single-family and multifamily housing units by size, of housing units begun each year:

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Healthcare sector

Leader in change and influence

Like so many other industries, healthcare is changing rapidly and profoundly—as are the ways in which architects and designers serve the sector.

Increases in total healthcare spending, the cost of providing health insurance, or prices charged for medical care are concerns for ordinary Americans. Healthcare inflation regularly outpaces the low rates of general inflation, hampering access. Simultaneously, the proliferation of convenient ways to get care—such as retail clinics and urgent care centers—has led more people to access healthcare and make claims on their insurance. (Source: PwC)

Design for healthcare is the birthplace of many innovations like evidence-driven (data-driven) design and the integration of data-related fields like predictive analytics with design. These practices, like so many other innovations from healthcare design, will continue to influence other project types. Simultaneously, ideas from domains such as retail and hospitality design will continue to find their way into healthcare delivery spaces.

01 > ALTERNATIVE DELIVERY FOR HEALTHCARE

According to consumer studies and analysis by consultancy PwC, technology and cost, as well as increasing consumer engagement and empowerment, are key drivers of change in healthcare delivery and business models. Some advanced (usually private sector) providers are offering more patient-centric healthcare models that include mobile “mHealth” services in lieu of office visits, greater access to patient information, and alternative physical locations for care such as retail outlets.

34% Survey respondents who got an MRI at a retail clinic or pharmacy.

43% Respondents who got an EKG at home (results sent via phone by their doctor).

SOURCE: PWC

Healthcare has already largely broken away from institutionalism. Now it’s about vibrancy and trendiness, often drawing from retail.”

—Eric Koffler, AIA Harley Ellis Devereaux

02 > BY 2025, HEALTHCARE INSURANCE AND SERVICES IS PREDICTED TO BE THE WORLD’S

Largest retail marketSOURCE: AFLAC

03 > PROJECTED GLOBAL SHORTAGE OF

12.9 million healthcare professionals by 2035

SOURCE: WORLD HEALTH ORGANIZATION

04 > HEALTHCARE RELATED OCCUPATIONS

Seven of the 10 occupations expected to grow the fastest between 2014 and 2024 relate to healthcare in one way or another.

1. Wind turbine service technicians: 108%

2. Occupational therapy assistants: 42.7%

3. Physical therapist assistants: 40.6%

4. Physical therapist aides: 39%

5. Home health aides: 38.1%

6. Commercial divers: 36.9%

7. Nurse practitioners: 35.2%

8. Physical therapists: 34%

9. Statisticians: 33.8%

10. Ambulance drivers and attendants, except emergency medical technicians: 33%

SOURCE: BUREAU OF LABOR STATISTICS

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05 > COWORKING SPACES: PREDICTED INCREASE SOURCE: DESKMAG

Workplace

Work and workplace redefined

Ideas of the future of work and workplace are inseparable from ideas about the people who will occupy them. As a result, discussions of the future of work spaces center on issues of attracting, retaining, and engaging top talent as well as maximizing productivity.

Predictions vary widely as to the type of future work people will engage in. However, two certainties remain: Work will evolve rapidly as technology, human needs and wants, and a host of other factors drive change; and new settings will be required to enable future workers to be engaged and productive.

01 > WORKPLACE EXPERIENCE

The CBRE FastForward 2030 workplace report states “work has become a consumer experience” as the talent war means employees and job seekers have gained more leverage. Forbes’ number one workplace trend for 2017 is the increasing demand for improved employee and candidate experience. Smart employers are investing in better spaces, additional training and development, and other strategies for attracting and retaining talent.

02 > PROGRAMMABLE AND HACKABLE: CUSTOMIZATION OF WORKPLACES

As employers struggle to keep up with the changing parameters of their businesses and needs of their workers, working spaces must be flexible enough to keep up. Like a phone that can be customized to suit user’s needs, workplace design is becoming much more flexible in support of new (often more mobile) work practices. Designers are taking inspiration from pop-up retail and hacker culture to respond to the need for customization without sacrificing quality of experience.

03 > CORPORATE MOBILITY AND GLOBALIZATION

“The notion that office occupiers are spatially fixed is being challenged daily,” wrote Dr. Lee Elliott, Head of Commercial Research for global property firm Knight Frank. Elliott argues that Foreign Direct Investment (FDI) is a good indicator that business is becoming more mobile and global. FDI has been on an upward trend since 2012 (up 25% year-on-year in 2015 alone and valued at U.S. $1.7 trillion).

SOURCES: KNIGHT FRANK, OECD

04 > COLLABORATION/PRIVACY BALANCE

A recent Steelcase survey, profiled in the company’s 360 publication, was conducted by the global research firm IPSOS. The study showed a strong correlation between employees’ satisfaction with their work environment and their level of engagement. Only 11% of respondents were highly satisfied with their work environment. Greater than 95% of these respondents, who were the most highly engaged, agree their workplace allows them to concentrate easily, feel a sense of belonging to their company and its culture, work in teams without being interrupted, and freely express and share ideas. 88% cited the ability to choose where to work within the office, based on their task. A physical environment that offers a mix of collaboration and private space is essential to provide an engaging work experience.

Because people are working anywhere and everywhere, the role of the office is changing in people’s lives. They are no longer simply places to go to do work, but instead are becoming hubs of activity that support collaboration, knowledge sharing, and innovation.”

—Jodi Williams, CallisonRTKL

0 2,000 6,000 10,000 14,000

2015

2017

2016 $10,100

$7,800

$12,700

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Education sector

Tradition and adaptation

As Americans continue seeking new ways to build upon the K–12 and higher education systems, educators and administrators are faced with many of the same drivers of change as other sectors, such as workplace, technology, demographics, changes in stakeholder expectations, and the increasing need for measurable performance. Consequently, educators on all levels are experimenting with and adapting many of the same tools that are used in other domains, including the design of environments that facilitate learning.

However, education will always retain unique needs and qualities because of its underlying mission and traditions. Consequently, both new ideas and deep experience in the domain are valuable as education on all levels evolves.

01 > THE DRIVE TOWARD INNOVATION & PERSONALIZATION

Educational institutions on all levels are focusing on creating curricula and environments that foster innovation and collaboration. Quoted in the NY Times story “The Innovation Campus: Building Better Ideas,” founding dean and vice provost Dan Huttenlocher of Cornell Tech says, “Being in bigger interactive spaces encourages expansive thinking, while being in a box of a room encourages box thinking.” Both public and private universities have invested in innovation centers, including the University of Utah, York University, Northwestern, University of Iowa, and Wichita State.

In addition to innovation, personalized learning is a significant trend on all education levels. Personalized learning is one of the focus points for the Gates Foundation, which cites examples from Lindsay Unified School District and the Summit Public Schools for higher graduation and college completion rates among graduates of personalized learning programs.

02 > TWO PREDICTIONS FOR 2020

Predictions abound regarding changes in the ways in which people work, shop, receive medical care, and participate in their communities. Whether driven by demographics, technology, or some other catalyst, it seems as though many key dimensions of living are changing. The methods, timing, and places of education are no exception. As learning itself changes, firms that focus on learning spaces are adjusting to new client demands and user realities.

The article “Five Big Ways Education will Change by 2020” lists Fast Company’s key trends in learning.

1. Students will interact with others remotely.

2. The success of tech will still rely on skilled teachers.

3. We’ll think differently about the diploma (i.e., society will move toward competency-based certifications rather than traditional diplomas).

4. Students will have a voice.

5. Educators and institutions will be forced

to adapt.

According to the Deloitte University Press’ Government 2020 project, which tracks dozens of trends and drivers that affect eight domains of government, unbundled and personalized learning will become the norm. Virtual learning, digitization, and augmented reality will also help redefine the learning experience.

Changes in technology, economics, and societal expectations are predicted to have a massive effect on how and where learning takes place.

Learning goes well beyond the formal years that society says should be devoted to it. Education is not only lifelong but life-wide and life-deep. The question for architects and designers is, how do we embed learning everywhere through the built, natural, and digital environment while still maintaining basic human needs for socialization, interaction, collaboration, and making things?”

—Lauren Della Bella, President, SHP Leading Design

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Human capital trends

Job #1

Talent is arguably the most important factor in the success of any professional service firm, and architecture is no exception.

While many dimensions of dealing with people are universal and enduring, such as the need for meaning in work and the value of being recognized for one’s efforts, much is changing. Technology, generational dynamics, and shifts in social beliefs have an effect on the talent picture for firms. Owners, managers, and employees alike face challenges and opportunities as they adapt to multigenerational workplaces, flexible scheduling, and new communication methods enabled by technology—and shifting beliefs in the place and meaning of work in the lives of those who do it.

01 > HUMAN CAPITAL TRENDS

The global consultancy Deloitte published a report in 2016 detailing the top 10 trends in human capital based on surveys and interviews with more than 7,000 business and HR leaders from 130 countries.

1. Organizational redesign: The rise of teams

2. Leadership awakened: Generations, teams, science

3. Shape culture: Drive strategy

4. Engagement: A continuing challenge

5. Learning: Employees take charge

6. Design thinking: Crafting the employee experience

7. Changing skills of the HR organization

8. People analytics

9. Digital HR

10. Workforce management (part-time and contingent workforce)

The top trend identified by respondents was a new “network of teams” structure in which companies build and empower teams to work on specific business projects and challenges.

Interestingly, survey respondents chose design thinking as one of the 10 most important trends for firms of all types (not merely design companies).

02 > THE STUDENT DEBT PICTURE

Students in every discipline face the quandary of how to meet growing educational costs. For many, student loans are a reality that will follow them years into their professional careers. This is a prospect that may dampen young people’s enthusiasm for the profession and delay entrepreneurs who wish to start firms. Perhaps student loan repayment will become a regular feature of compensation for younger professionals.

03 > COST OF TURNOVER

Direct replacement cost of turnover

50%—60% of employee’s annual salary.

SOURCE: SHRM

Total estimated cost of turnover 90%—200% of employee’s annual salary.

Architecture student debt anticipated upon graduation SOURCE: DESIGNINTELLIGENCE

Student Debt Increase

$350 billion in 2004$1.2 trillion in 2014 2014 mean outstanding balance:

$26,000SOURCE: FEDERAL RESERVE BANK

0K 10K 20K 30K 50K40K

2013–14

2015-16

2014-15 $40,462

$33,518

$37,546

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Generational dynamics

Work through the ages

From the first glance at the title, the Harvard Business Review article “Managing People from Five Generations” confronts the reader with a dizzying idea—that our workplaces are now composed of people born during WWII to those who arrived just before 9/11.

Unsurprisingly, managing such a diverse workforce entails a delicate search to find the most productive path through divergent viewpoints, values, and habits.

The profession of architecture is no exception, and many who lead practices—of any size—find themselves dealing with managing multigenerational teams, motivating workers at widely different life stages, as well as promoting healthy (often bidirectional) exchange of expertise, skills, and knowledge in an environment of mutual understanding and respect.

01 > MYTH-BUSTING

In 2015, IBM released its Institute for Business Value Millennial Survey, a multigenerational study of employees in 12 countries. The survey yielded some surprisingly consistent answers across generations, challenging commonly held ideas about younger (and older) workers.

Some common myths the survey busted included the idea that millennials had different goals from other generations of workers; whether making a positive impact on their organizations or managing work/life balance, millennials’ responses were virtually identical to their Gen X and baby boomer peers. The survey also shows that millennials prefer face-to-face interaction more than stereotypes suggest. Likewise, millennials seem to be no more likely to job-hop than any other generation: 75% of millennial respondents reported that they’ve held their current positions for at least three years.

05 > AGING ARCHITECTS

According to AIA membership data, the age of architects (like many professions) is increasing. Current statistics stand in contrast to 1991, for example, when 26% of architects were under 35 and 40% were 36-44.

03 > LEADERS + SUCCESSION PLANNING

7% Firms that believe they are “excellent” at developing millennial leaders.

14% Companies that describe themselves as “strong” at succession planning throughout the business.

SOURCE: DELOITTE

04 > IN 2020

Generation Z will begin to enter the workplace

SOURCE: FORTUNE

02 > SHARE OF MILLENNIALS IN THE WORKFORCE

In 2020,

~50% of the U.S. workforce

In 2030, 75% of the global workforce

SOURCE: IBM

25.6%55-64

10.5%65+ 18%

Under 35

22.1%36-44

23.8%45-54

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Diversity and equity

Architecture ties our communities and each of us to the other, touching everything—health, wellness, education, history, culture, and beauty. It reflects who we are. To grow a robust and valued profession prepared to serve the needs of people young and old, rich and poor who are all hungry for better communities, better infrastructure, and better lives, the profession requires talents as diverse as life itself, and it must be a mirror of the rich human tapestry it serves.

Yet industry data show that women and people of color are underrepresented in the field of architecture. Organizations such as NOMA, AIA, and others are working to address the issue. The good news is that the profession is becoming more aware and there are signs that the situation is improving.

01 > DIVERSITY IN THE PROFESSION OF ARCHITECTURE 03 > AIA DIVERSITY EFFORTS

The Institute believes that in order to be successful the profession requires talents as diverse as life itself. To that end, the Diversity & Inclusion initiative promotes diversity through a variety of means and tools:

• Equity, Diversity, Inclusion as a Core Value

• Measure and Report Equity, Diversity, and Inclusion

• Equity, Diversity, Inclusion Training and Guides for AIA Volunteers, Members, and Firms

• Develop Assessment Tools

• Advocate for Equity in Higher Education

• Engage and Expose Kids to Architecture Through K-12 Programs

• Tell Our Stories For more on AIA’s diversity and equity efforts visit aia.org.

In 2015, industry membership organizations came together to create a study examining what architects believe is causing underrepresentation, how significant they feel it is, and offering suggestions of what could be done to address it. The result was the Diversity in the Profession of Architecture report, a data baseline that can inspire development of programs and actions that can lead to a more diverse, inclusive profession.

Among other findings, the report found disagreement between men and women on the degree to which women were represented, unlike the underrepresentation of people of color on which all respondent types agreed. The report also investigated the factors that contribute to underrepresentation, including work/life balance, lack of role models, and awareness of architecture as a potential career choice.

02 > PERCEIVED REPRESENTATION OF WOMEN IN THE FIELD OF ARCHITECTURE SOURCE: AIA DIVERSITY IN THE PROFESSION OF ARCHITECTURE REPORT

In order to create lasting cultural change, equity, diversity and inclusion n eeds to become a core value of the Institute that is part of our DNA. Beyond what we say, ‘EDI’ needs to be the ethos of how we think and what we do.”

—Rosa Sheng, AIA

0

10

20

30

40

50

5%14%

2%5%

24%

33%

43%

36%

26%

12%

Very well represented

WOMENMEN

Somewhat well represented

Somewhatunderrepresented

Very underrepresented

Don’t know

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Finance and investment trends

Full speed ahead? Not so much.

In both the finances of firm management and the wider world of how clients fund projects, trends show both growth and caution.

According to AIA’s Firm Survey research, many firms of all sizes continue to do well in billing and profitability; just over 49% of firms reported profits of 10% or greater in 2015.

The 2016 AIA Client Insight Report shows relatively strong plans among clients to spend on design and construction. However, in the wider world of finance caution abounds as economic and political uncertainty has money staying on the sidelines.

03 > PRIVATE “DRY POWDER” CAPITAL SITTING IDLE OUTSIDE OF THE MARKETS (AS OF SEPTEMBER, 2016)

$1.5 trillion usdSOURCE: PREQIN

04 > PROJECTED A/E/C GROWTH IN THE U.S

3%—5% Possible downward pressure from election outcomes, Fed credit decisions, international uncertainties

SOURCE: RIDER LEVETT BUCKNALL

01 > ARCHITECTURE MERGER & ACQUISITION (M&A) UPDATE

02 > ANTICIPATED CHANGES IN DESIGN & CONSTRUCTION SPENDING BY OWNERS SOURCE: AIA CLIENT INSIGHTS REPORT

0 20 40 60 80 100

DECREASE NO CHANGE INCREASE

OFFICE

HEALTHCARE

HIGHER ED.

K-12 ED. 42% 12% 46%

36% 40% 24%

12% 42% 46%

22% 54%24%

U.S. M&A in 2015 in all industries $4.7 trillion topping 2007’s record for deal value

SOURCE: KPMG

Share of strategic plans with M&A included over the next five years

78% of architecture and interiors firms

(and 68% of all participating firms)

SOURCE: ZWEIG GROUP

As baby boomer leaders progress toward retirement and firms eye new geographic markets and other expansion strategies, M&A activity continues to be brisk among architecture firms. Low interest rates and strong backlogs also help place many firms in a position to acquire others. The trend among architecture firms mirrors M&A activity in many sectors of business.

While many more combinations have taken place on every scale, the past two years have seen several high-profile mergers and acquisitions, including HOK’s acquisition of 360-Architecture, Callison and RTKL joining under ownership by Arcadis, and DLR Group absorbing Sorg Architects.

As of this writing, merger and acquisition activity shows no sign of abating for the next several years.

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Adaptive strategies & lessons

Future lessons

All but the youngest architects in professional practice remember the difficulties that A/E/C firms (and businesses of all types) experienced during the Great Recession. Though the nation technically emerged from the recession in June 2009, annual spending on nonresidential construction didn’t hit its lowest point until 2011, when many firms felt the downturn most deeply.

The AEC industry tends to be recession-prone and cyclical, and it is reasonable to assume that hard times will come again. Those firms that survived the last downturn did so through a variety of approaches. While some firms returned to their pre-recession ways, many converted the hard lessons they learned into new best practices that continue to strengthen them now. Today’s architects have the opportunity to learn the successful strategies of the past and apply them in new ways appropriate for any future challenge.

01 > WHAT HAS CHANGED? TWO KEY ISSUES...

Competition During the downturn, many firms provided more services than were covered by the fees they charged. Consequently, clients became accustomed to receiving more for their money. Advancements in technology have enabled firms to better substantiate their design decisions with data and evidence, further enhancing the value they can deliver to clients.

AIA research shows that billings finally came back to pre-recession levels by 2014-2015, removing some of the financial pressure for firms to give away value without adequate compensation. While firms have more resources to dedicate to their practices, the bar of client expectations seems to have been permanently raised.

02 > THE TOOLKIT

Throughout the Great Recession and in its aftermath, firms of all sizes innovated—and in some cases entirely reinvented—what they offered and how they brought their services to market. The new practices are the adaptations of success that firms can emulate to better prepare themselves for future disruption. The following are focus areas to look for innovation and learn from the successful example of others.

Technologies: Adopting new technologies that enhance the firm’s ability to assess client needs more accurately, arrive at a broader array of solution options, or find economies in projects are a substantial investment that may pay off in a more competitive environment.

Business & financial models: Changes in negotiation and contract terms, as well as how a firm is structured to do its work, can be powerful competitive advantages.

Service offerings: While a few firms are truly limited by deep specialization, most have the ability to expand into new service areas in order to capture market needs.

Marketing: Many firms found new markets and ways to present themselves, increasing the sophistication of their brand design, mix of communication media, and storytelling ability.

Talent During the last downturn, tens of thousands of architects lost their positions; many left the profession permanently. Firms consolidated, toughed it out, or folded.

Though the A/E/C industry has experienced several straight years of growth—albeit at modest rates— the scars left by the Great Recession are still visible. As firms gain more commissions and need more talent, they are hampered by the lack of appropriate candidates (especially those with middle-levels of experience). A November 2016 DesignIntelligence survey of 60 leaders of architecture and design organizations showed talent to be their number one concern—more than triple the degree to which they cited their second top concern of political upheaval.

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Adaptive strategies & lessons

Case studies in adaptation

In times of challenge, successful firms find ways to adapt to existing conditions and create opportunities for expanded influence and revenue. Many of the examples are applicable at different scales—from large multinationals to small partnerships.

01 > NEW GEOGRAPHIES

Even global downturns usually affect regions at different times. Consequently, when one market is down, others are likely to be recovering (or not yet affected). Such strategies have been employed by large multinationals to 12-person specialty design firms, and there are cases of each type surviving the last downturn by focusing on hot markets in Asia and the Middle East.

02 > CLIENT DIVERSITY

Just as economic downturns rarely affect all regions at once, so too are there industries or market sectors that thrive while others are down. During the Great Recession, firms of all sizes survived (and sometimes grew) on institutional and public clients who were on a different spending cycle than private industry.

04 > VERSATILE DESIGN

Both top-tier multinationals and smaller residential practices have the opportunity for additional impact—and additional revenue—by broadening their design to include furniture. Whether outfitting a high-end home with furnishings that fit seamlessly into the design of the space, to producing millions in private label office furniture design (often sold to other architects), architecture firms have the opportunity to win more work by stepping outside the traditional bounds of their discipline.

Examples also exist of both large and midsize firms expanding into standalone brand strategy and graphic design engagements that are not focused on the built environment.

05 > SERVICE DIVERSITY

During the Great Recession, even the largest and most prestigious firms suffered. One such firm fought back by building up a property management practice. Despite its seeming lack of creativity, property management allowed the firm to not only survive, but also ensure that their buildings were operated in a way to optimize performance.

03 > CONTRACT INNOVATIONS

Traditional contractual arrangements have been challenged by evolving delivery methods and the assignment of delivery roles. Whereas firms may once have supplemented their design fees with construction administration, today an owner’s representative may perform those services. Rather than cede those responsibilities entirely, some firms are creating opportunities to manage or supervise parts of the construction process that align with their technical specialties. For example, one firm with a strong practice in designing sustainable facades is regularly hired to supervise the construction of only the building envelope on its projects. In this way, the firm can ensure that its design work truly delivers the benefits and cost savings that it promises clients.

Though a riskier practice, retainers for ongoing small projects (even for large clients) helped small to midsize firms in many markets.

One midsize firm contractually guarantees the energy performance of the buildings it designs even though the firm does not operate the buildings. Instead, it secures a separate contract for post-occupancy evaluations and continuous monitoring that not only provides additional income, but also early detection of problems.

Failure is simply the opportunity to begin again, this time more intelligently.”

—Henry Ford

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Professional Practice

Technology The technological environmentEmerging & maturing technologiesThe future tools of design

SustainabilityGetting to zero: advances in sustainabilityCreating healthy places

Design trendsInnovation and community

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The technological environment

The world as network

After decades of discussion and theorizing, the idea that the physical and digital worlds will integrate is becoming a reality. The Internet of Things (IoT), wearables, smart buildings, and smart cities are related ideas that are some of the most dominant technology trends today.

Questions arise as the world seemingly moves toward greater degrees of integration of the physical and digital worlds: What unintended effects can we anticipate? Can devices that use so many different technologies be managed on a common platform? How will smarter environments affect our need for energy (and our impact on the environment)? As cybercrime enjoys explosive growth, how secure can the IoT really be?

01 > HACKING THE IOT

Software vulnerabilities in a wired world could affect cars, medical devices, transportation systems, power grids, and more.

According to a story in CSO, hackers at the Defcon security conference found 47 new vulnerabilities that affect 23 devices from 21 manufacturers. The vulnerabilities were revealed in IoT security talks, workshops, and on-site hacking contests at the conference.

03 > SMART BUILDINGS/SMART CITIES/IOT

Smart buildings—and by extension smart cities—are a growing focus of governments and industry. India has launched an ambitious plan to transform 98 cities and towns—roughly 35% of India’s urban population—into smart cities at a cost of approximately $150 billion. Investments by the United States government seem paltry by comparison: A mere $160 million in federal research grants was announced in 2015 to develop smart city approaches. Meanwhile, private companies formerly outside of A/E/C, such as IBM, are developing initiatives in smart building technology to take advantage of the unprecedented IT infrastructure that a truly wired physical environment (and objects) would require.

However, much of the idea of “smart” environments remains to be defined, and frameworks for understanding and making decisions about smart environments are still being developed. Designers will also need to grapple with far more than simply facilitating ubiquitous connectivity. As the experience of the physical and digital worlds—both given form by design—will confront designers with shaping ubiquitous interaction.

Factories (e.g., operations management, predictive maintenance) 1.2–3.7

Low estimate

Size in 2025, in $trillion

Total: $4-11 trillion

Nine settings where value may accrue

High estimate

0.9–1.7Cities (e.g., public safety and health, traffic control, resource management)

0.2–1.6Human (e.g., monitoring and managing illness, improving wellness)

0.4–1.2Retail (e.g., self-checkout, layout optimization, smart customer-relationship management)

0.6–0.9Outside (e.g., logistics routing, autonomous (self-driving) vehicles, navigation)

0.2–0.9Work sites (e.g., operations management, equipment maintenance, health and safety)

0.2–0.7Vehicles (e.g., condition-based maintenance, reduced insurance)

0.2–0.3Homes (e.g., energy management, safety and security, chore automation)

0.1–0.2Offices (e.g., organizational redesign and worker monitoring, augmented reality for training)

02 > THE INTERNET OF THINGS OFFERS POTENTIAL IMPACT OF $4-11 TRILLION PER YEAR SOURCE: MGI

A 2016 story on NPR detailed the hacking of internet provider Dyn’s data centers, which were apparently accessed through hacked IoT devices. The DDOS (distributed denial of service) attack created issues with popular websites such as Twitter, PayPal, Spotify, Netflix, and even The New York Times and The Wall Street Journal, leaving security experts and consumers wondering whether enough attention is on IoT security.

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Sector

Assets Usage Labor

Emerging & maturing technologies

01 > BLOCKCHAIN BEYOND BITCOIN

Blockchain, the open network technology behind the Bitcoin digital currency, has the potential for applications the original programmers likely never envisioned when they thought to create a new financial system. According to Deloitte, the technology could be applied in diverse ways, including as a platform for media and entertainment content exchange, a method to speed up insurance premium and claim payments, as well as to help track the transaction history of properties by tax authorities.

As with the ‘horseless carriages’ of the early 1900s, which at first were merely added to the jumble of pedestrians and carts swarming through the streets, the real benefits of (driverless cars) won’t be realized until we see substantial changes in our transportation infrastructure.”

—Jerry Kaplan, The Wall Street Journal

04 > MGI INDUSTRY DIGITIZATION INDEX: CONSTRUCTION INDUSTRY LAGGING SOURCES COMPILED BY MCKINSEY GLOBAL INSTITUTE: APPBRAIN, BLUEWOLF, COMPUTER ECONOMICS,

EMARKETER, GARTNER, IDC RESEARCH, LIVECHAT, U.S. BEA, BLS, U.S. CENSUS BUREAU, MGI ANALYSIS

03 > NATIONAL CYBERSECURITY

$14 billion 2016 U.S. national cybersecurity spend

$19 billion 2017 U.S. national cybersecurity budget

SOURCE: WHITEHOUSE.GOV

02 > GLOBAL CYBERCRIME LOSSES BY 2019 ARE ESTIMATED TO REACH

$2.1 trillion an increase of 200% from 2011–2016

SOURCE: JUNIPER RESEARCH

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The future tools of design

The paradox for firms

Architecture and design firms have the challenge of not only keeping up with the way technology supports the construction and operations of a building, as well as the ways in which building users will interact with a combined physical and digital world (i.e., all the technology they need to design into projects), but architects also must keep up with rapid advancements in design software and other tools for running their own businesses. Technology for architecture and design firms in the future will continue to present dueling benefits and costs as firms reap greater productivity from new technologies while facing greater demands to invest in rapidly changing (and improving) tools.

01 > EXPERT OPINION

Architect magazine recently interviewed a panel of experts to provide their perspectives on the most influential future tools and technologies in design. Experts included technology thought leaders such as Randy Deutsch, AIA, of the University of Illinois; Bob Yori, AIA, of SOM; Joyce Hwang, AIA, director of Ants of the Prairie; and Eric Owen Moss, FAIA, principal and lead designer, Eric Owen Moss Architects. Some top picks:

1. Scaled digital tools that streamline the design-to-fabrication process, blurring the line between design and the means of construction

2. The combination of computation and robotics as a tool for unique and custom projects rather than mass production

3. Large-scale composites as a material for new forms of building facades

4. LIDAR scanning technology “to move beyond surveying and into design so we can make models of the world without having to model the world”

02 > DESIGN FORM INCUBATING TECH

NBBJ has partnered with virtual reality (VR) startup Visual Vocal to create a platform that combines VR with mobile and cloud-based communications platforms. The new tool will allow project participants to remotely experience unbuilt environments and provide instantaneous feedback. The firms see their product as transforming architecture workflow by making decision-making more effective and inclusive. The framework being developed by Visual Vocal can eventually be applied beyond architecture in industries such as aerospace, product design, and biotech.

03 > UPDATE: WEARABLES ON THE JOBSITE

According to PwC, wearables are finding two main uses in manufacturing that could be applied in construction:

Augmented assembly: Assembly workers using smartglasses to help ensure that all parts in complex sequences are assembled in the right place and order, removing downtime.

Improved inspection: Parts inspectors can take a photo of a part that needs to be modified—perhaps adding a spoken record of the issue—and relay the data to the appropriate coworker in seconds.

DAQRI is field testing an undisclosed number of “smart helmets,” which use augmented reality to help workers construct or maintain equipment. Each helmet costs approximately $10,000 and has widespread application for training, as well as for improving accuracy, timeliness, and safety.

04 > PRODUCTIVITY INCREASE

40%—50% Expected increase in productivity by 2025 due to machine learning and automated technologies

SOURCE: MCKINSEY

The answer, it turns out, isn’t man versus machine—it’s man and machine. Only through leveraging technology will service providers and salespeople be able to focus on what human workers for now are uniquely capable of doing: deepening relationships and providing stellar customer experiences.”

—Clara Shih, Author of The Social Business Imperative

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Getting to zero—advances in sustainability

The definition of sustainability in architecture has expanded as people have come to understand the complexity and interconnectedness of the problems involved. No longer is sustainability merely a proxy for environmental impact; the term now includes ideas as wide-ranging as social equity and human health.

In response, AIA has developed a four-part approach to sustainability, including initiatives in energy and net zero carbon, materials, resiliency, as well as applying design to health.

01 > MATERIALS FROM MUSHROOMS

Mycelium bio-composites are an emerging potential building material in which mushroom roots, or mycelium, grow in loose cellulosic material such as sawdust and yield durable materials with attributes similar to that of polystyrene foams. According to the architecture research nonprofit Terreform ONE, mycelium blocks (or Micofoam) can become a “self-sufficient, perpetual-motion construction technology.”

Demonstration projects include Hy-Fi, an organic mushroom brick tower at Moma PS1, as well as furniture produced at the University of British Columbia.

SOURCE: PHYS.ORG, TERREFORM ONE, INHABITAT.COM

02 > 2030 CARBON GOALS

By introducing the 2030 Challenge in 2006, Architecture 2030 created a growing movement to make design of the built environment more sustainable. The AIA supports the movement through its 2030 Commitment program.

In 2015, the number of signatories to the 2030 Commitment increased by 16% to 366 firms, up from 308 firms the year before. Though goals have not always been met, 59% of the gross square footage in whole building projects—roughly an 8% improvement over 2014—used energy modeling. The program also reported an average gross square foot energy savings of 38.1%.

SOURCE: AIA

03 > WATER: KEY FACTS FROM WHO & UNICEF

Each year the World Health Organization (WHO) and UNICEF collaborate on the Joint Monitoring Report (JMP) to track progress during the Millennium Development Goal period, which ended in 2015. The latest JMP report gives a snapshot of both water and sanitation use and achievements around the globe.

• 663 million people—1 in 10—lack access to safe water.

• 91% of the global population use an improved drinking water source, up from 76% in 1990.

• 8 out of 10 people, still without improved drinking water sources, live in rural areas.

• In 2015, it was estimated that 2.4 billion people globally had no access to improved sanitation facilities.

• 82% of the global urban population vs. 51% of the rural population uses improved sanitation facilities.

• Economic benefits of investing in water and sanitation include an overall estimated gain of 1.5% of global GDP and a $4.3 return on every dollar invested due to reduced healthcare costs for individuals and society, and greater productivity and involvement in the workplace.

SOURCE: WHO; WHO & UNICEF JOINT MONITORING

REPORT 2015

04 > “AGRIHOODS”: LIVING THE LAND

It’s farm-to-table taken to a new level. Agrihoods, or residential developments with working farms at their center, have begun to catch the attention of homeowners who want to become community farmers who consume what they grow or sell the excess at farmers markets and to local chefs.

Contributing factors to the growing popularity of agrihoods include the local food movement and aspirations to get closer to the land.

Thriving agrihood developments include Agritopia in Gilber, Az.; Serenbe in Chattahoochee Hills, Ga.; Prairie Crossing in Grayslake, Ill.; South Village in South Burlington, Vt.; and Hidden Springs in Boise, Idaho.

SOURCE: NY TIMES

05 > SNEAKY SOLAR

Dyaqua, a family-run Italian solar business, thinks it has an answer to ugly solar panels. The company has invented what it calls “Invisible Solar” panels, which are not so much invisible as indistinguishable from common construction materials such as concrete, slate, stone, terracotta, and wood. According to the company’s website, the panels can be substitutes for the traditional roofing, wall covering, and flooring materials they mimic. Moreover, the panels are created from non-toxic and recyclable polymers.

SOURCE: FAST COMPANY

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Getting to zero—advances in sustainability (cont’d)

06 > RESILIENCE & THE URBANIZED WORLD

According to the World Bank, cities contribute the amazing sum of 80% of global GDP and are home to 55% of the world’s population. Their growth is good news for the global economy, and each year urban areas expand by more than 75 million people—that’s more than the combined population of the world’s 85 smallest countries. But the same high density of people and assets that drives the economic productivity of cities makes them vulnerable to disasters. By 2030, without significant investment to improve the resilience of cities around the world, climate change may drive up to 77 million urban residents into poverty.

SOURCE: WORLD BANK

07 > NEW RESOURCE FROM NOAA AND NASA

The U.S. Climate Resilience Toolkit, a website that consolidates information from across the federal government, recently added a built environment section to help communities plan and prepare for weather—and climate-related impacts.

TOOLKIT.CLIMATE.GOV/TOPICS/BUILT-ENVIRONMENT

Hindsight

Circular economy

The circular economy, a model in which the by-products of production become the fuel for future productivity, was identified as a growing trend in the 2014 AIA Foresight Report. Since that time, the concept has continued to gain ground with governments and businesses.

In 2015, the European Commission adopted an ambitious Circular Economy Package, which includes legislative proposals on waste to stimulate Europe’s transition toward the circular model. The package is expected to foster global competitiveness, sustainable economic growth, and new jobs.

McKinsey estimates shifting toward a circular economy could add $1 trillion to the global economy by 2025.

SOURCE: THE GUARDIAN

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Creating healthy places

One of the four major pillars of AIA’s sustainability efforts focuses on design and health. Architects are uniquely positioned to have an impact on many of the public health issues of the day: asthma, obesity, diabetes, depression, and more. Transformational outcomes are possible when the design and planning process focuses on health impacts and equitable access to healthy places. Through its research, advocacy, and education efforts, the Institute is helping place health at the forefront of architectural practice.

01 > ACTIVE TRANSPORTATION: “THE NEXT FRONTIER”

Centered on human-power (i.e., biking and walking), active transportation is enjoying growth in investment and returns for cities, businesses, and individual commuters. The ULI’s “Active Transportation and Real Estate” report provides a well-supported, compelling case for the market demand and financial returns. For example:

• 50% of U.S. residents say that walkability is a top priority or a high priority when considering where to live.

• U.S. Census showed that the number of people who traveled to work by bike increased roughly 62% between 2000 and 2014.

• Since the opening of the 3.5-mile (5.6 km) Katy Trail in the Uptown neighborhood of Dallas in 2006, property values have climbed nearly 80%, to $3.4 billion.

03 > A PHYSICIAN’S PERSPECTIVE

Dr. Howard Frumkin, from the School of Public Health at the University of Washington, has been a prominent voice in the public health community discussing the role of the built environment. In a recent article in the DesignIntelligence Quarterly, Frumkin cited the United States’ relatively low life expectancy (42nd among the world’s nations) despite large healthcare expenditure. He recommends greater collaboration between the design and public health communities in order to mitigate health threats in the built environment, including noise, temperature and humidity, harmful chemicals, and physical activity (or lack thereof), and to conduct empirical studies that help the work of both doctors and architects.

05 > NEW STANDARDS

Much has changed in sustainability design standards and systems since the founding of the USGBC in 1993. USGBC’s LEED system is now in its fourth iteration and new approaches to sustainability and health standards have continued to emerge; many with their own approaches or emphasis. More established systems like BREEAM and Green Globes continue to evolve and are joined by The International Living Future Institute’s Living Building Challenge and the IWBI’s WELL standard. Now the US Centers for Disease Control and Prevention (CDC), General Services Administration (GSA), and the Center for Active Design have teamed up to develop Fitwel, a building certification for the betterment of building occupant health and productivity. Due for full release in 2017, Fitwel is a science-based, seven-part scorecard system.04 > HIGH-TECH HEALTH

Healthcare wearables, such as Omron Healthcare’s Project Zero line of blood pressure monitoring devices, use a combination of connected devices and apps to allow healthcare professionals to know patients’ vital signs from afar. Their use impacts both time and location in treating patients and could change expectations regarding medical care.

Wearables like those from Fitbit (perhaps the most widely known brand) can provide data and information that help individuals monitor their vital signs and activities as well as their progress on activity and health goals. Some wearables companies, such as Polar, are developing networks of multiple devices and apps that work in concert to help with weight loss and other fitness goals.

The built environment has the opportunity to influence occupant behavior in support of better long-term and short-term occupant health. Chronic disease, infectious disease, and injury can all be mitigated by the way that we put our buildings together and the materials that we use to construct them.”

—Liz York, FAIA Associate Director for Quality and Sustainability Centers for Disease Control and Prevention

02 > HEALTHY BUILDING FEATURES

70% Owners and developers who definitely plan to use healthy building features

SOURCE: AIA 2016 CLIENT INSIGHTS REPORT

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Innovation and community

Connecting, inspiring, empowering

Architecture has the power to help people make connections, have great experiences, and perform better in their work and endeavors. More and more it seems that people are embracing these ideas and demanding more of their environments. Mixed-use developments, innovation districts, and urban revitalization are all examples of this trend; they often intermingle. The ability of architects and designers to create environments that bring people together and transform communities is creating great opportunity for professional practices.

01 > INNOVATION DISTRICTS

According to the Brookings Institution, innovation districts are developments that combine economic, physical, and networking assets with a supportive, risk-taking culture in order to create an innovation ecosystem—“a synergistic relationship between people, firms, and place (the physical geography of the district) that facilitates idea generation and accelerates commercialization.”

Innovation districts are lauded for their positive economic and cultural impact. Started in 1999 to support entrepreneurs building fast-growing companies, the Cambridge Innovation Center (CIC) is perhaps the first example of an innovation districts. Since its founding it has been a home to more than 3,500 companies, many of which started there. Companies originally headquartered at CIC have raised more than $2.7B in venture capital and strategic investment since 2001 (while at CIC and after moving out).

Innovation districts have been planned or implemented in cities as diverse as Oklahoma City, Chattanooga, Philadelphia, and many more.

Adam Gross, FAIA, principal of multidisciplinary firm Ayers Saint Gross, says multiple factors make an innovation district successful: “First you need excellent institutional partners, such as research universities, academic medical centers, and engaged corporate sponsors, combined with engaged communities and a scalable context. With this foundation, one can rely on placemaking to form an innovation ecosystem that in turn creates a setting that draws entrepreneurs and sets the context for connecting them to one another, along with connecting the district to the wider city.”

02 > CREATING (URBAN) COMMUNITY

Some theorize that the focus on creating community through design results from changing consumer values and preferences—especially the millennials’ apparent attraction to experiences and the value they seem to place on authenticity and community.

Rapid urbanization is a global phenomenon. In the United States, urbanization has resulted in a resurgence of city neighborhoods and work in higher density, mixed-use projects.

The “other” urban environment Pritzker-prize-winning architect Renzo Piano believes that the future of the cities are in their outlying areas. He has created a group of six young architects, working under the name of G124, to help forge sustainable, walkable, connected communities.

In an interview with NPR, Renzo Piano captured the opportunities and perils behind G124’s focus on the suburbs: “We are able to transform the peripheries of the big cities [into a] real urban place, where people stay together, where tolerance is found, where people share value in the same place[s]—library, concert hall, museum, whatever; or the city will be broken in two pieces: the rich part in the center—that will be about conservation—and the poor part in the outskirts—that is about protest. It’s inevitable.”

03 > GLOBAL URBAN POPULATION IN 2045

6,000,000,000+SOURCE: UNITED NATIONS

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0% 10% 20% 30% 40% 50% 60% 70% 80%

Communitycolleges

Towncenters

Communitybuildings

Publicparks

Libraries

Public transportation

Roads/streets

Schools (K-12)

Bridges

Public housing

69%

75%

56%

48%

45%

42%

38%

31%

26%

29%

57%

2%4%

37%Very important

Not at all importantNot very important

somewhat important

37%

34%29%

Transportation (e.g., roads, bridges)

Public housing (e.g., senior, affordable)

Public spaces (e.g., schools, parks, libraries)

Public infrastructure

Beyond transportation

Infrastructure is often thought of as simply bridges, roadways, and facilities for generating and delivering power. While those elements and functions are important, many more types of infrastructure are needed in order to support communities that are viable, sustainable, and equitable. Social infrastructure, which combines traditional transportation and power facilities with public buildings and spaces, schools and universities, and public housing (e.g., senior and affordable housing), creates a more comprehensive picture of what is needed on local and national levels.

A recent Harris poll included questions commissioned by AIA on public attitudes toward social infrastructure spending. The results present a compelling picture of how the architecture and design communities might best address not only the needs identified by local, state, and national officials, but also the sentiments of ordinary citizens whose communities could be directly affected.

04 > MOST IMPORTANT COMMUNITY FEATURES TO RECEIVE A CONSISTENT LEVEL OF FUNDING

01 > HOW SHOULD COMMUNITIES ALLOCATE THEIR INVESTMENT DOLLARS?

On average, Americans feel about one third (34%) of public funds budgeted for community features should be allocated to public buildings and/or spaces. Of the remaining, they would allocate 37% to transportation and 29% to public housing. Almost seven in 10 Americans believe schools should receive a consistent level of public funding. This is second only to roads/streets, reported by 75%.

02 > INFRASTRUCTURE INVESTMENT

60% Americans who feel infrastructure investment will improve property values, public safety, and attraction of new residents to their communities

03 > HOW IMPORTANT ARE WELL-SUPPORTED & MAINTAINED PUBLIC BUILDINGS TO THE FUTURE OF THE COMMUNITY?

SOURCE FOR ALL: HARRIS POLL FINDINGS, OCTOBER 2016

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Global resources

International Monetary Fund imf.org

Organization for Economic Co-operation and Development (OECD) oecd.org

United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) unescap.org

United Nations Statistics Division unstats.un.org/unsd/default.htm

World Bank data source datacatalog.worldbank.org

U.S. federal, state, and local government resources

Bureau of Labor Statistics bls.gov

Congressional Budget Office cbo.gov

Centers for Disease Control and Prevention (CDC) Built Environment and Health Initiative cdc.gov/nceh/information/built_environment.htm

CIA World Fact Book cia.gov/library/publications/the-world-factbook/index.html

Department of Homeland Security High Performance and Integrated Design Resilience Program dhs.gov/high-performance-and-integrated-design-resilience-program

DOE Buildings Performance Database bpd.lbl.gov

National Endowment for the Arts (NEA) www.arts.gov

National Institutes of Health (NIH) nih.gov

(Smithsonian) Cooper-Hewitt, National Design Museum cooperhewitt.org

U.S. Department of Commerce, National Institute of Standards and Technology nist.gov/index.html

U.S. & Foreign Commercial Service Global Design & Construction Team export.gov/industry/architecture

U.S. Census Bureau census.gov

U.S. Department of Labor dol.gov Trade organizations and non-profit resources

Academy of Neuroscience for Architecture anfarch.org

Alliance for Board Diversity theabd.org

American Institute of Architects aia.org

American Society of Civil Engineers (ASCE) www.asce.org

American Society of Interior Designers (ASID) www.asid.org

Architecture 2030 architecture2030.org

Arid Lands Institute aridlands.org

Associated General Contractors of America agc.org

Association of Professional Futurists apf.org

Brookings Institution brookings.edu

Building Performance Center buildingperformancecenter.org

Cato Institute cato.org

Center for Creative Leadership ccl.org

Concordia theconcordiasummit.org

Conference Board conference-board.org

Construction Owners Association of America coaa.org

Construction Users Round Table curt.org

CABA (Continental Automated Buildings Association) caba.org

Design Management Institute dmi.org

Ellen MacArthur Foundation ellenmacarthurfoundation.org

Global Buildings Performance Network (GBPN) gbpn.org

Industrial Designers Society of America (IDSA) idsa.org

Institute for Human-Centered Design humancentereddesign.org

International Building Performance Simulation Association, United States regional affiliate (IBPSA-USA) ibpsa.us

International Association for Automation and Robotics in Construction (IAARC) iaarc.org

International Code Council Green Construction Code iccsafe.org/cs/igcc/pages/default.aspx

International Interior Design Association (IIDA) iida.org

Lean Construction Institute leanconstruction.org

The Missing 32% Project themissing32percent.com

National Association of Home Builders (NAHB) Research Center homeinnovation.com

National Organization of Minority Architects (NOMA) noma.net

National Council for Public-Private Partnerships ncppp.org

National Institute of Building Sciences (NIBS) nibs.org

Pew Research Center pewresearch.org

Resilient Design Institute resilientdesign.org

Rocky Mountain Institute rmi.org

Smart Buildings Institute (SBI) smartbuildingsinstitute.org

Terreform ONE terreform.org

Urban Land Institute uli.org

U.S. Green Building Council usgbc.org

World Future Society wfs.org

Blogs, podcasts and online publications

AIA Podnet aia.org/practicing/AIAPodnet/index.htm

ArchDaily archdaily.com

Archinect archinect.com

Architect Magazine architectmagazine.com

Architectural Record archrecord.construction.com

AEC Business aec-business.com

Building Performance Podcast greendreamgroup.libsyn.com

Business of Architecture businessofarchitecture.com/business-of-architecture-podcast

CityLab (formerly Atlantic Cities) citylab.com

Design for Good Blog from Big Think bigthink.com/blogs/design-for-good

Design Futures Council designfuturescouncil.com

References & resources

References & resources

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Design Observer designobserver.com

DesignIntelligence di.net

Entrepreneur Architect entrearchitect.com

The Economist economist.com

Fast Company fastcompany.com

Freakonomics Radio freakonomics.com/radio

HBR IdeaCast feeds.harvardbusiness.org/harvardbusiness/ideacast

London School of Economics (LSE) Podcast lse.ac.uk/newsAndMedia/videoAndAudio/Home.aspx

McKinsey Global Institute (MGI) mckinsey.com/insights/mgi

Metropolis Magazine metropolismag.com

MIT Enterprise Forum Cmbridge blog, podcast, and videos mitforumcambridge.org/resources

Placemakers podcast from Slate Magazine slate.com/podcasts/placemakers.html

WGBH Innovation Hub with Kara Miller wgbhnews.org/programs/innovation-hub

Commercial, professional, and other resources

Arup Foresight/Drivers of Change driversofchange.com

Deloitte University Press government-2020.dupress.com

Glimpse Tomorrow glimpsetomorrow.com

Knight Frank knightfrank.com

LexisNexis lexisnexis.com

Lincoln Institute of Land Policy lincolninst.edu

PSFK psfk.com

PwC Global Megatrends pwc.com/gx/en/issues/megatrends.html

Open Resources in Built Environment Education (ORBEE) orbee.org

SEED Network seednetwork.org

Shaping Tomorrow shapingtomorrow.com

Standard & Poors standardandpoors.com

Books

Edmondson, Amy C. and Reynolds, Susan Salter. Building the Future: Big Teaming for Audacious Innovation. Oakland, CA: BK/Berrett-Koehler, 2016. Print.

Fiksel, Joseph R. Resilient by Design: Creating Businesses That Adapt and Flourish in a Changing World. Washington D.C.: Island, 2015. Print.

AIA’s Foresight Report is the product of a partnership between AIA and DesignIntelligence, and was authored by DesignIntelligence on behalf of AIA.

Founded in 1994, DesignIntelligence is a research, publishing, and business networking firm that is focused on improving the performance of A/E/C and design organizations worldwide.

DesignIntelligence convenes the Design Futures Council

Visit www.di.net for more information.

References & resources (cont’d)

The American Institute of Architects 1735 New York Avenue, NW Washington, DC 20006 aia.org

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1735 New York Avenue, NWWashington, DC 20006

aia.org