Diversification is helping architecture firms in a sluggish market

At SMRT Architects & Engineers, an advanced manufacturing win may move to staffing two weeks later. A civic project can take nine months to kick off.

Graham Vickers, SMRT's senior principal and principal-in-charge of marketing, explained to AIA Architect why that gap helps. Say private demand has stopped booming nine months on, he said. The firm is still receiving the work it won earlier. Public projects a firm secures early keep coming in after private clients slow down.

That matters because these firms operate in a flat market. The AIA/Deltek Architecture Billings Index has stayed mostly in negative territory since October 2022, even as the latest Bureau of Economic Analysis figures show the U.S. economy is technically expanding. Some markets and regions are busy, but overall firm billings are lackluster.

Fast private wins, slow public ones

SMRT is an architecture and engineering firm, so it has work coming in from both disciplines. AIA Architect framed its sector mix as intentional diversification: spreading across markets and geographies reduces a firm's risk exposure, but it usually takes deliberate preparation to build expertise clients will pay for.

The important detail is how far apart the timelines are. In a fast private sector like advanced manufacturing, the gap between a signed contract and billable work is short, so a firm's backlog can empty about as quickly as it filled. Civic procurement moves slowly, so those projects hit the schedule well after they were won. When a firm holds both, its work arrives on different timelines, which suggests that the mix of sectors protects staff utilization more than the number of sectors does.

For firms whose pipeline sits mostly in private, quick-to-start work, this is a useful test. Seven sectors that all move on similar timelines may protect less than three sectors that run on very different ones.

Investment strategists are making a similar argument about portfolios. In a March 2026 note, Wellington multi-asset strategist Adam Berger wrote that investors have long relied on stocks and bonds moving in opposite directions, but higher inflation can push them to move together, so the usual diversification works less reliably. The comparison is loose, but the lesson carries over: holdings only protect you if they don't all turn at the same moment.

Getting in before projects get big

SMRT also watches emerging submarkets for chances to grow. It got into radiopharmaceutical manufacturing early. These plants must be built to make and handle radioactive medical drugs that doctors use to diagnose and treat diseases such as cancer. SMRT designed the Rayzebio Radiopharmaceutical Manufacturing Facility.

Vickers told AIA Architect that the firm first entered the field by working with startups, and that, as with everything else, those companies get acquired and their projects grow larger. That order matters. A firm that learns a specialized building type on small startup jobs could already have the experience by the time an acquirer wants something bigger, rather than having to compete for that larger job with no track record.

SMRT's housing bet will take longer to pay off. The firm saw more and more need for sustainable and affordable housing, but Vickers doesn't expect that market to boom tomorrow. In his view, growth will probably come only after one or two political cycles. The need comes first, he said, and every market starts there.

In Harvard Business School Working Paper 23-032, Dominika Kinga Randle and Gary Pisano studied three decades of patenting and diversification data from 28,376 firms. Companies that entered a new industry through diversification went on to develop technologies specialized to that industry. The more intensely a firm built that market-specific know-how, the longer it tended to last in the new market. Firms holding general-purpose technology, the kind useful across many markets, were also more likely to diversify in the first place.

The study measures patenting, not design work, so the comparison to architecture firms is loose. Still, it suggests that entering a new market means building expertise specific to it, not only reusing what a firm already knows, and that how deeply a firm invests in that expertise may decide whether it stays. SMRT's acquisition of Petersen Engineering, announced in September, immediately added Passive House and multifamily housing design expertise. That is one way to do it faster.

WRNS Studio enters through a client

Greystar, a developer that has worked with WRNS Studio before, brought the firm into a student housing partnership between Cabrillo College and the University of California, Santa Cruz. WRNS partner Lilian Asperin said each partner covered what the other lacked. Cabrillo, a community college, had land to build on but had never delivered campus housing. UCSC had that experience but no land. Asperin called it a beautiful opportunity for WRNS to land in the mix.

Asperin said WRNS stays in contact with clients after their projects wrap up. The firm studies how buildings work once occupants move in and keeps an eye out for future needs and openings.

Her example is Princeton University. To get the story of its new Frist Health Center out, WRNS helped Princeton organize and host a symposium there for the Society for College and University Planning. Princeton's stakeholders, like those at any busy client, had already turned to other initiatives. Asperin said the university appreciated WRNS offering to take on that work and help spread the love.

The point is that WRNS took on a job the client no longer had time for, after the building was done. For firms that can't afford an acquisition, staying close to past clients could be a cheaper way to reach a new market, though it depends on having clients who come back. Greystar's invitation shows what that can pay back.

Interest rates and the case for patience

Carol Rickard-Brideau, CEO of Little Diversified Architectural Consulting, told AIA Architect that speculative development stays uncertain while the Federal Reserve keeps changing rates. AIA Architect reported that this can leave architects feeling stuck. They have work lined up, but they worry about how long they can hold on through the slow period.

The rate path explains the unease. Brent Schutte, chief investment officer of the Northwestern Mutual Wealth Management Company, noted that the Fed raised short-term rates from 0.25% in March 2022 to 5.5% by July 2023, with housing, small businesses and manufacturing taking the brunt. The billings index went mostly negative in October 2022, in the middle of that campaign. Since late 2024 the Fed has cut rates by 1.75 points to 3.75%, yet in his August commentary markets were pricing in one rate hike by January 2027.

So a developer pricing a speculative project faces rates that climbed sharply, came partway back down and may now tick up again. Schutte also pointed to recovery in rate-sensitive areas: the ISM Manufacturing Index hit its highest level since May 2022. For a firm like SMRT, where an advanced manufacturing win can staff up in two weeks, a manufacturing upturn would show up in utilization quickly. A reversal would show up just as fast.

Evelyn Lee, a past AIA president and founder of Practice of Architecture, listed several forces that keep the stagnation going. In her view, the current administration seems to be toying with the supply chain. She also pointed to AI. She said it is opening up new work for firms in specific areas but also meeting resistance from local jurisdictions.

The profession has faced this before. AIA Architect cited earlier slumps brought on by the dot-com bubble, the Great Recession and COVID-19. It then collected strategies from five firms that are still growing through the current one.

The main limit on this approach is time. SMRT spent years building its seven sectors, and Vickers expects the housing bet to take political cycles to pay off. A firm that needs work next quarter can't fix that by entering a new market now, because a nine-month civic lead time that will help later also means a new civic practice won't bill for months.