CA INDUSTRY (NAICS) REPORT 54131CA Architects in Canada High rise: Steady growth in the Canadian real estate market is projected to drive industry revenue Samuel Kanda | September 2020 IBISWorld.com +1-800-330-3772 info@IBISWorld.com Architects in Canada 54131CA September 2020 Contents About This Industry...........................................5 Competitive Landscape...................................27 Industry Definition..........................................................5 Market Share Concentration....................................... 27 Major Players................................................................. 5 Key Success Factors................................................... 27 Main Activities................................................................5 Cost Structure Benchmarks........................................ 28 Supply Chain...................................................................6 Basis of Competition................................................... 31 Similar Industries........................................................... 6 Barriers to Entry........................................................... 32 Related International Industries....................................6 Industry Globalization..................................................33 Industry at a Glance.......................................... 7 Major Companies............................................ 34 Executive Summary....................................................... 9 Major Players............................................................... 34 Other Players................................................................34 Industry Performance..................................... 10 Operating Conditions...................................... 36 Key External Drivers.....................................................10 Current Performance................................................... 11 Capital Intensity........................................................... 36 Technology And Systems........................................... 37 Industry Outlook............................................. 15 Outlook......................................................................... 15 Performance Outlook Data......................................... 17 Revenue Volatility........................................................ 39 Regulation & Policy...................................................... 39 Industry Assistance..................................................... 40 Industry Life Cycle....................................................... 17 Key Statistics.................................................. 41 Products and Markets..................................... 19 Industry Data................................................................41 Supply Chain................................................................ 19 Products and Services.................................................19 Demand Determinants................................................ 22 Annual Change.............................................................41 Key Ratios.................................................................... 42 Additional Resources...................................... 43 Major Markets..............................................................23 International Trade.......................................................24 Additional Resources.................................................. 43 Business Locations..................................................... 24 Industry Jargon............................................................ 43 Glossary Terms............................................................43 2 IBISWorld.com Architects in Canada 54131CA September 2020 About IBISWorld IBISWorld specializes in industry research with coverage on thousands of global industries. Our comprehensive data and in-depth analysis help businesses of all types gain quick and actionable insights on industries around the world. Busy professionals can spend less time researching and preparing for meetings, and more time focused on making strategic business decisions that benefit you,your company and your clients. We offer research on industries in the US, Canada, Australia, New Zealand, Germany, the UK, Ireland, China and Mexico, as well as industries that are truly global in nature. 3 IBISWorld.com Architects in Canada 54131CA September 2020 Covid-19 Coronavirus Impact Update IBISWorld's analysts constantly monitor the industry impacts of current events in real-time – here is an update of how this industry is likely to be impacted as a result of the global COVID-19 pandemic: · Revenue for the Architects industry in Canada is expected to decline in 2020 as result of the COVID-19 (coronavirus) pandemic. For more detail, please see the Current Performance chapter. · Demand for the industry's products and services is expected to fluctuate as a result of the coronavirus pandemic. For more detail, please see the Demand Determinants chapter. · The industry's profit margin is anticipated to decline as a result of the pandemic and the depressed economic conditions that have resulted from it. For more detail, please see the Cost Structure Benchmarks chapter. Note: The content in this report is currently being updated to reflect the trends outlined above. 4 IBISWorld.com Architects in Canada 54131CA September 2020 About This Industry Industry Definition The Architects industry in Canada plans and designs residential, institutional, leisure, commercial and industrial buildings and structures by applying their knowledge of design, construction procedures, zoning regulations, building codes and building materials. Major Players There are no major players in this industry Main Activities The primary activities of this industry: Architectural consulting services, except landscape Architectural design services, except landscape Architectural services, except landscape Building architectural design services Drafting services The major products and services in this industry: Office buildings Retail and restaurant Healthcare institutions Educational institutions Other nonresidential buildings Single-family residential projects Multifamily residential projects Other 5 IBISWorld.com Architects in Canada 54131CA September 2020 Supply Chain SIMILAR INDUSTRIES Industrial Building Construction in Canada Engineering Services in Canada Commercial Building Construction in Canada Municipal Building Construction in Canada RELATED INTERNATIONAL INDUSTRIES Global Architectural Services Architects in the US Architectural and Design Services in New Zealand Architectural Activities in Ireland 6 Architectural Services in Australia Architectural Activities in the UK IBISWorld.com Architects in Canada 54131CA September 2020 Industry at a Glance Key Statistics $4.3bn % = 2015-2020 Annual Growth -1.2% -2.8% 0.0% 1.0% Corporate profit Revenue Annual Growth Annual Growth Annual Growth 2015-2020 2020-2025 2015-2025 1.8% Key External Drivers Value of residential construction Value of nonresidential construction Housing starts -0.1% Overnight rate 4.0% Industry Structure $498.9m POSITIVE IMPACT Profit Annual Growth Annual Growth 2015-2020 2015-2025 Capital Intensity Concentration Low Low Globalization -2.9% Low 11.5% MIXED IMPACT Profit Margin Annual Growth Annual Growth 2015-2020 2015-2025 -3.1% Life Cycle Revenue Volatility Mature Medium Regulation Technology Change Medium Medium Competition Medium 6,886 NEGATIVE IMPACT Businesses Annual Growth Annual Growth Annual Growth 2015-2020 2020-2025 2015-2025 0.2% 2.0% Industry Assistance Barriers to Entry Low Low Key Trends 25,157 The industry has benefited from positive demographics Employment Annual Growth Annual Growth Annual Growth 2015-2020 2020-2025 2015-2025 5.5% 3.7% The COVID-19 pandemic is expected to cause the industry's profit margin to decline Rising investment in commercial building developments will likely boost revenue Revenue growth and an increasing profit margin will attract more operators $2.0bn Wages Annual Growth Annual Growth Annual Growth 2015-2020 2020-2025 2015-2025 4.6% 3.8% 7 Demand for architectural services in resource-rich provinces will be sluggish An increasing number of companies will offer LEED-certified green building designs An increase in public-private partnerships for infrastructure projects has raised architectural revenue IBISWorld.com Architects in Canada 54131CA September 2020 Products & Services Segmentation 11.3% 8.2% 8.0% 8.6% 17.1% 4.2% Office buildings Retail and restaurant Healthcare institutions Educational institutions Other nonresidential buildings Single-family residential projects Major Players % = share of industry revenue Architects Source: IBISWorld SWOT STRENGTHS Low Imports Low Product/Service Concentration Low Capital Requirements WEAKNESSES Low & Steady Barriers to Entry Low & Steady Level of Assistance Low Profit vs. Sector Average High Customer Class Concentration Low Revenue per Employee OPPORTUNITIES High Revenue Growth (2015-2020) High Revenue Growth (2020-2025) High Performance Drivers Overnight rate THREATS Low Revenue Growth (2005-2020) Low Outlier Growth Value of nonresidential construction 8 IBISWorld.com Architects in Canada 54131CA Executive Summary September 2020 Buoyed by a modest expansion in the Canadian real estate market and increased residential and public investment in nonresidential construction over the majority of the five years to 2020, revenue for the Architects industry in Canada is expected to increase. Industry revenue is estimated to rise an annualized 1.8% to total $4.3 billion over the five years to 2020. Companies in this industry are primarily engaged in the planning and design of buildings and other structures. Consequently, industry revenue is tied to the health of the real estate market. For instance, as corporate balance sheets swelled in 2015, many businesses expanded their storefronts and offices, increasing demand for architectural design services. However, a rapid decline in commodity prices and economic activity have slowed commercial and residential development, causing revenue to decline an estimated 9.5% in 2020 alone. This decline can be mainly attributed to the ongoing COVID-19 (coronavirus) pandemic and the depressed economic conditions that have resulted from it. The coronavirus pandemic has caused many key economic drivers to decline, thus reducing demand and revenue for industry operators. Furthermore, industry profit is anticipated to decline over the five years to 2020 due to decreasing demand resulting from the coronavirus pandemic. However, positive long-term trends over the majority of the five years to 2020, such as an aging, urbanizing and a progressively wealthy population, have helped spur demand for residential construction, especially in metropolitan areas, which boosted revenue for architectural services. In addition, an increase in public-private partnerships for infrastructure projects, under which the financing and operation costs are shared between the government and private sector, raised architectural revenue. Steady growth in the Canadian real estate market is projected to drive industry revenue, which is expected to increase an annualized 4.0% to $5.3 billion over the five years to 2025. Canadian architects will benefit from anticipated increases in corporate profit and disposable income, as these drivers will propel residential and nonresidential construction. Further industry growth will hinge on the popularity of environmentally conscious designs. Higher projected oil prices, along with increased regulations regarding the reduction of carbon emissions, will incentivize energy-efficient structures, aiding architectural firms that specialize in planning environmentally friendly homes and commercial structures. 9 IBISWorld.com Architects in Canada 54131CA September 2020 Industry Performance Key External Drivers Value of nonresidential construction Trends in institutional and commercial developments are major drivers of industry revenue. The value of nonresidential construction serves as a proxy for commercial and industrial developments. Services related to these types of developments generate over 50.0% of industry revenue. Demand for nonresidential construction is sensitive to employment, consumer spending, corporate profit and interest rates. The value of nonresidential construction is expected to decrease in 2020, posing a potential threat to the industry. Value of residential construction Demand for the construction of single- and multifamily residential units influences demand for industry services. In total, projects related to residential construction account for an estimated 19.1% of revenue in the Canadian Architects industry. Demand for residential construction is sensitive to economic and financial conditions, such as employment, consumer disposable income and interest rates. The value of residential construction is expected to decrease in 2020. 10 IBISWorld.com Architects in Canada 54131CA September 2020 Corporate profit A high share of industry revenue comes from commercial and industrial construction. To pay for or finance a building project, a company must first have a healthy balance sheet. Therefore, a higher corporate profit margin coincides with higher levels of commercial construction. In 2020, corporate profit is expected to decrease. Housing starts Housing starts measure the number of new, privately owned housing units started in a given year. The number of housing starts has a direct influence on industry revenue, with an increase in the number of housing starts positively affecting the industry. Housing starts are expected to decrease in 2020. Overnight rate The overnight rate is the rate at which major financial institutions can borrow and lend short-term funds to one another. Changes in the overnight rate affect institutional lending to builders and developers. During periods of low rates, builders can more easily afford construction projects. In turn, increased construction boosts demand for architectural services, as architects are needed in the design stages of residential and nonresidential building projects. The overnight rate is expected to decrease in 2020, representing a potential opportunity for the industry. 11 IBISWorld.com Architects in Canada 54131CA Current Performance September 2020 Demand for operators in the Architects industry in Canada is dependent on the demographic and economic trends affecting the construction industry, as architects are primarily engaged in the planning and design of buildings and other structures. Over the majority of the five years to 2020, increasing Canadian employment and corporate profit helped revive privately funded construction activity, ultimately benefiting the industry. In addition, low interest rates aided demand for construction projects and architectural planning services, as building projects are typically financed through debt because of their high costs. Increasing public investment has also boosted industry revenue related to infrastructure and public works projects. Overall, industry revenue is expected to increase an annualized 1.8% to $4.3 billion over the five years to 2020, with an expected decline of 9.5% in 2020 alone. The decline in revenue in 2020 can be mainly attributed to the COVID-19 (coronavirus) pandemic. This global crisis has caused employment, corporate profit and overall construction activity to decrease. Since the Architects industry in Canada is sensitive toward macroeconomic changes, if those drivers decrease, industry revenue is also expected to decrease. This decline in revenue is expected to persist as long as the domestic economy remains depressed from the coronavirus pandemic. Slow expansion Although the Architects industry in Canada has experienced moderate growth, the industry has benefited from positive demographics and a resilient Canadian residential real estate market. Over the past five years, a growing, aging, urbanizing and progressively wealthy Canadian population boosted demand for architectural services related to residential construction. Although housing starts are expected to decline an annualized 1.8% during the five-year period, the rise during the first half of the period has boosted demand for industry services. However, much of this demand was related to redevelopments and renovations of single- and multifamily residential structures. Housing starts, which measure the number of new privately owned housing units started in a given year, are expected to decline in 2020 specifically after increasing strongly during the majority of the period. Nevertheless, planning and design services related to residential projects comprise a significant portion of industry revenue and have been a driver of industry growth in major cities, such as Toronto, Montreal and other high-growth western cities, such as Vancouver. Growth in these markets has increased industry revenue and improved demand for small-scale architects that specialize in residential planning, and are therefore more dependent on the housing market. 12 IBISWorld.com Architects in Canada 54131CA September 2020 Depressed nonresidential markets While construction has steadily expanded for most of the past five years, recent weakness in the global oil and commodity markets has facilitated a significant decrease in Canadian nonresidential construction in 2015, 2016 and 2020. Amid rising concerns of a depressed economy, the Bank of Canada has kept its overnight rate near historic lows. This action will potentially keep mortgage rates low and encourage new building construction, which will boost demand for design and planning projects in Canada's more populated regions. Nevertheless, demand for architectural services in the country's resource-rich provinces, such as Alberta, is expected to be sluggish, as low oil and gas prices will continue to discourage investments in nonresidential construction projects through the end of the year. Commercial construction stabilizes in other sectors While nonresidential construction spending on the manufacturing and industrial sectors diminished over the past five years, the industry benefited from growth in corporate profit during the majority of the period. A widening margin enabled companies to expand their business spending, increase employment and enlarge their office space. These activities helped increase demand for architectural services for office construction and renovation design. Up until 2020, demand for architectural services for commercial developments increased as Canadian disposable income and consumer spending rose. Moreover, industry revenue has been propelled by an increase in government spending on infrastructure. According to Statistics Canada and IBISWorld estimates, architectural design and planning services related to public sector projects account for an estimated 30.6% of industry revenue. Architects provide services for transportation and infrastructure projects, such as the construction of a new airport. In addition, architectural services are commonly needed for public and municipal projects, such as the construction of a new arts centre, education building or healthcare facility. An increase in government spending on these developments has benefited industry operators. Furthermore, the increasing use of public-private partnership arrangements, under which financing and operation costs are shared between the government and private sector, has kept this segment stable over the five years to 2020. Although these factors have led to an expansion in industry revenue, the coronavirus pandemic is expected to cause the industry's profit margin to decline. The industry profit margin, measured as earnings before interest and taxes, has fallen from an estimated 14.6% of revenue in 2015 to 11.5% of revenue in 2020. The decrease in profit can be mainly attributed toward the declines in many key economic drivers in 2020, such as corporate profit, housing starts and the values of nonresidential and residential construction. However, as a result of the positive growth over the majority of the five years to 2020, the industry was still able to prosper. Consequently, the number of industry establishments is projected to increase at an annualized rate of 0.1% to 6,964 locations over the five years to 13 IBISWorld.com Architects in Canada 54131CA September 2020 2020. This also fuelled an increase in industry employment as the industry is labour intensive and relies on highly knowledgeable and skilled employees. As a result, the number of employees is expected to increase at an annualized rate of 5.5% to 25,157 people over the five years to 2020. Going green Moreover, a bright spot for this industry has been a broader movement toward environmentally conscious design. Over the five years to 2020, architects have increasingly been contracted to design energy efficient buildings. Increased environmental awareness among property developers and governments has led to the emergence of green design principles. In 1998, the US Green Building Council developed the Leadership in Energy and Environmental Design (LEED) green building rating system. Shortly after, in 2002, the Canada Green Building Council was established to advocate for green building policies across the country. Green buildings are costlier to design and build, but yield savings on future energy costs. Therefore, green design represents a rapidly expanding source of income for architectural service firms. Historical Performance Data 14 Year Revenue IVA Estab. Enterprises Employment Exports Imports ($m) ($m) (Units) 2011 3,577 1,914 6,027 2012 3,653 1,968 2013 3,707 2014 Wages Domestic Value of Demand nonresident ial constructio n ($m) ($b) (Units) (Units) ($m) ($m) ($m) 5,939 17,831 N/A N/A 1,381 N/A 164 6,017 5,930 17,796 N/A N/A 1,415 N/A 176 2,029 6,626 6,530 17,716 N/A N/A 1,427 N/A 184 3,646 2,097 6,804 6,705 18,056 N/A N/A 1,474 N/A 191 2015 3,968 2,249 6,917 6,815 19,262 N/A N/A 1,605 N/A 173 2016 4,168 2,433 7,080 6,975 21,989 N/A N/A 1,737 N/A 156 2017 4,612 2,797 7,083 6,974 24,534 N/A N/A 1,897 N/A 160 2018 4,791 2,935 7,200 7,084 25,591 N/A N/A 1,996 N/A 161 2019 4,796 2,996 7,129 7,014 26,479 N/A N/A 2,131 N/A 161 2020 4,338 2,594 6,964 6,886 25,157 N/A N/A 2,005 N/A 143 IBISWorld.com Architects in Canada 54131CA September 2020 Industry Outlook Outlook Revenue for the Canadian Architects industry is expected to increase at an annualized rate of 4.0% to $5.3 billion over the five years to 2025. Growth in corporate profit and consumer spending is expected to provide the framework for an improved Canadian real estate market, which will boost demand for industry services. Architecture firms will benefit from growth in nonresidential construction, which is the industry's largest market. The value of nonresidential construction in Canada is expected to increase at an annualized rate of 4.6% over the five years to 2025, bolstering demand for the design and planning of office, industrial, retail and other commercial construction projects. Another force driving the industry's growth is the low interest rate environment resulting from a recovering economy after the COVID-19 (coronavirus) pandemic. Low interest rates make it easier for companies or individuals to borrow money to finance new building projects, due to the lowered cost associated with paying back the loan. Since interest rates are expected to remain near the zero-lower bound as the economy slowly recovers, downstream buyers will be more willing to take on new projects and hire industry operators. In addition to other improving economic drivers, industry demand is expected to continue to flourish over the five years to 2025. Increased investment will boost demand Rising investment in large-scale commercial building developments (IBISWorld report 23622acA), most notably offices and hotels, is expected to boost industry revenue. These types of community projects will continue to improve industry revenue because architectural services will be needed in their design. In addition, an increase in the popularity of mixed-use properties that contain retail, office and residential components, will promote the design of innovative buildings, increasing demand for architecture in metropolitan regions. Although short-term lending rates are expected to slightly increase over the five years to 2025, interest rates are still expected to remain relatively low. This will incentivize investors to put cash into real estate developments in Canada, which will continue to offer attractive returns compared with other forms of investments, such as government securities. 15 IBISWorld.com Architects in Canada 54131CA September 2020 In the residential market, urbanization and an aging population will likely lead to an increase in high-rise condominium and apartment construction, especially in major cities such as Calgary, Toronto and Vancouver. For example, the 81-storey M3 Condo, which is currently in the construction process and is scheduled for completion in the latter half of 2023, is a new modernly designed luxury condo that is going to be a part of the M City community in the heart of Mississauga, ON. This building is designed by industry player IBI Group Inc., and is going to become the tallest tower in Mississauga by a significant margin. Demand for architectural services in the housing construction market will also increase, aiding small industry operators that specialize in home design and planning. Moreover, the value of residential construction is expected to increase at a faster pace compared with the previous period, growing at an annualized rate of 4.6% over the five years to 2025. Competition Industry revenue growth and an increasing profit margin will bring more operators into the industry. The number of industry operators is forecast to increase at an annualized rate of 2.0% to 7,594 companies over the five years to 2025. Meanwhile, industry employment is also projected to increase, rising an annualized 3.7% to 30,218 people during the same period, as greater demand for architectural services will lead to more hiring. The industry is labour intensive, and businesses will find it difficult to find a cost-efficient substitute for knowledgeable employees. As a result, wages are expected to increase an annualized 3.8% to $2.4 billion over the five years to 2025. Since revenue growth is projected to be faster than wages, profit is also anticipated to increase over the next five years. An increase in industry operators will also lead to heightened competition. Many of the industry's largest companies also serve as engineering and construction companies, offering clients a one-stop shop for design, procurement and construction services. Small- and medium-sized industry operators will experience direct competition with multidisciplined design, engineering and building companies, making it difficult for architecture-only firms to secure contracts for large-scale building projects. The industry's largest companies will benefit from offering a broad range of predesign and other design services, including planning, interior design, landscape architecture and engineering services. However, an increasing number of companies will offer LEED-certified green building designs. Canada has more square metres of LEED-certified space than any nation except for the United States, according to the Canadian Green Building Council. An increase in demand for environmentally conscious designs and potential savings on energy costs will further drive industry revenue growth over the next five years, especially for operators that specialize in green and LEED design. 16 IBISWorld.com Architects in Canada 54131CA Performance Outlook Data Year Revenue IVA 2020 2021 2022 2023 2024 2025 ($m) 4,338 4,626 4,859 5,021 5,149 5,268 ($m) 2,594 2,922 3,072 3,183 3,248 3,302 Industry Life Cycle September 2020 Estab. Enterprises (Units) 6,964 7,179 7,358 7,496 7,610 7,728 Employment Exports Imports Wages (Units) 25,157 26,579 27,824 28,795 29,556 30,218 ($m) N/A N/A N/A N/A N/A N/A ($m) N/A N/A N/A N/A N/A N/A ($m) 2,005 2,122 2,223 2,300 2,360 2,414 (Units) 6,886 7,082 7,246 7,375 7,483 7,594 The life cycle stage of this industry is Domestic Value of Demand nonresident ial constructio n ($m) ($b) N/A 143 N/A 149 N/A 160 N/A 167 N/A 173 N/A 179 Mature LIFE CYCLE REASONS IVA is expected to outpace GDP Industry services are well accepted by downstream markets The company’s essential services have remained the same over the years The Architects industry in Canada is in the mature phase of its life cycle. IBISWorld forecasts industry value added (IVA), which measures an industry's contribution to the overall economy, will increase at an annualized rate of 3.9% over the 10 years to 2025, while Canadian GDP is projected to grow an annualized 1.6% during the same 17 IBISWorld.com Architects in Canada 54131CA September 2020 period. Although IVA growth outpaces the economy, other factors indicate the industry's maturity. Demand for architectural services primarily stems from investment in nonresidential building markets, and to a lesser extent, investment in residential construction. In turn, demand for private construction is driven by long-term economic and population growth, corporate profit and industrial activity. Furthermore, the services provided by the industry are well accepted by downstream markets. However, competition from multidisciplined engineering and construction companies is increasing. These competitors have in-house architectural design capabilities and can offer prospective clients a one-stop shop that provides full services in design, procurement and construction. While the industry has evolved through the use of technology, such as computerassisted design, its essential services have remained the same. However, green buildings or environmentally conscious designs will provide an opportunity for future growth. Operators that are able to expand their green offerings ahead of the broader industry are expected to find greater success over the five years to 2025. 18 IBISWorld.com Architects in Canada 54131CA September 2020 Products and Markets Supply Chain KEY BUYING INDUSTRIES KEY SELLING INDUSTRIES 1st Tier 1st Tier Commercial Building Construction in Canada Engineering Services in Canada Private Schools in Canada Surveying & Mapping Services in Canada Full-Service Restaurants in Canada 2nd Tier Hotels & Motels in Canada Software Publishing in Canada Public Schools in Canada Public Administration in Canada Municipal Building Construction in Canada Industrial Building Construction in Canada 2nd Tier Consumers in Canada Products and Services The majority of revenue generated in the Canadian Architects industry is through nonresidential architectural services in 2020. The four subcategories within this market include educational projects, office building projects, healthcare institutions and retail and restaurant projects. 19 IBISWorld.com Architects in Canada 54131CA September 2020 The products and services offered by industry operators are not expected to change much due to the COVID-19 (coronavirus) pandemic. However, demand for certain products and services may fluctuate during this time of economic uncertainty. Although demand and revenue are expected to decrease in 2020, some products may experience an increase in demand. For example, healthcare institutions and advisory services may endure a slight increase in demand due to the importance of healthcare institutions and advisory services for renovations. However, recreational facilities and other nonessential projects may endure a short period of decreased demand. Educational institutions Architects are commonly contracted for new construction projects, additions and renovations on educational buildings, such as schools, colleges and universities. Most education is publicly funded in Canada, with relatively few private schools at the primary, secondary and postsecondary levels. Therefore, educational construction projects are largely funded by the government, with budgetary priorities determining demand for new school construction and existing structure repair and renovation. Educational institutions are estimated to account for 8.6% of industry revenue in 2020. Due to the well-established educational institutions already in place, this share of industry revenue has decreased slightly over the five years to 2020. Healthcare institutions Healthcare facilities, which include hospitals, clinics, doctors' offices, rehabilitation centres and general health centres, are typically owned by nonprofit corporations. Consequently, healthcare construction is usually funded privately or through a combination of public and private financing. Therefore, trends in private nonresidential construction investment, as well as demographic shifts in the number of elderly consumers in Canada, are strong indicators of demand for architectural services related to healthcare construction. This segment has endured a slight decrease as a share of industry revenue over the five years to 2020, and is expected to account for 8.0% of revenue in 2020. Office buildings Over the five years to 2020, demand for architectural services for office building construction and renovation has grown in line with the overall Canadian economy during the majority of the five-year period. Office construction is principally determined by growth in the service sector workforce. The office segment comprises a variety of different sectors, including technology, finance and communications. Typically, demand peaks during periods of strong economic growth because the need for space rises as new businesses 20 IBISWorld.com Architects in Canada 54131CA September 2020 enter the market and existing companies expand operations. This segment is expected to account for 11.3% of industry revenue in 2020. Retail and restaurant Architects are also contracted to design retail buildings, including shopping malls, restaurants, bars and fast food outlets. During the majority of the five-year period, Canadian employment and per capita disposable income growth enabled consumers to spend more on shopping, dining out and other leisure activities. This, in turn, has boosted demand for new retail and restaurant spaces, which ultimately benefited the Architects industry in Canada over the five years to 2020. Retail and restaurant buildings are expected to account for 8.2% of industry revenue in 2020. Other nonresidential buildings Other categories within the nonresidential market are architectural design services related to hotel and convention centre projects, recreational building projects and industrial construction projects. During the majority of the period, improving employment, rising disposable income and higher consumer spending have led to an increase in commercial building activity and architectural service revenue. However, trends in oil and commodity prices determine industrial and commercial development in resource-rich provinces such as Alberta. This segment has slightly decreased over the five years to 2020 and is expected to account for 17.1% of industry revenue in 2020. Multifamily residential projects Residential building projects account for an estimated 19.1% of industry revenue in 2020. The provision of services to multifamily projects is estimated to account for 14.9% of revenue. Architectural revenue from multifamily residential projects in Canada has increased over the past five years, as Canadian real estate stability was driven by strong underlying fundamentals. A growing, aging, urbanizing and progressively wealthy Canadian population has boosted residential real estate demand and increased revenue for architectural design services related to residential construction. For the majority of the past five years, strong revenue growth in this market occurred in major cities such as Toronto and Montreal. Single-family residential projects Conversely, single-family projects are expected to account for 4.2% of industry revenue in 2020. This segment has slightly decreased over the five years to 2020, as multifamily buildings are growing more in popularity across major cities such as Toronto and Montreal. 21 IBISWorld.com Architects in Canada 54131CA September 2020 Other Other services commonly include advisory services related to urban planning, project site master planning, interior design, landscape design and engineering services. Demand for these functions may be driven by private or public sources. This segment has increased over the five years to 2020, as external competition increases and industry operators need to rely on other services for another revenue stream. In 2020, this category is expected to account for 27.7% of industry revenue. Demand Determinants Demand for operators in the Architects industry in Canada is ultimately dependent on the financial, demographic and economic trends that affect the construction industry. This is because architects are hired for the preplanning and designing services for construction and building projects. Over the majority of the five years to 2020, construction markets in Canada have thrived. The top macroeconomic factors affecting demand for construction, and subsequent demand for architectural services, are population growth, household wealth, corporate profit, GDP growth and low interest rates. Over 55.0% of industry revenue will be derived from nonresidential projects in 2020. In the commercial market, economic factors, such as corporate profit and access to credit, influence nonresidential construction and architecture demand. Within the commercial and industrial component, the majority of revenue is derived from office and retail design. These markets tend to be most sensitive to changes in the labour market, consumer spending and corporate profit, as companies with expanding revenue and a good profit margin tends to increase office space. Demand has also been driven by foreign ownership of and investment in commercial properties in Canada due to the country's less stringent foreign ownership restrictions. Architectural revenue from the nonresidential market is supplied by government funding, usually in the form of infrastructure spending. Architects are contracted for a variety of infrastructure and public works projects, including healthcare facilities, educational buildings and transportation projects. In 2020, architects are projected to derive an estimated 19.1% of revenue from the residential construction market. Demand for residential construction is dependent on employment, disposable income levels and housing affordability, which is driven by financial factors such as the availability of credit and low interest rates. Similar to the commercial construction market, residential construction in Canada has thrived during the majority of the five-year period. However, demand for industry services is expected to fluctuate in 2020 and over the five years to 2025. This is a direct result of the COVID-19 (coronavirus) pandemic and the depressed economic activity that has resulted. As corporate profit, disposable income and values for nonresidential and residential construction falls, demand from the industry's major markets are expected to decrease. This trend is 22 IBISWorld.com Architects in Canada 54131CA September 2020 expected to persist as long as those economic drivers are performing poorly. Conversely, the low interest rate environment may spur industry demand as the economy begins to slowly improve from the coronavirus pandemic. Major Markets Due to the COVID-19 (coronavirus) pandemic, demand from the industry's major markets is expected to slow down in 2020. As the value of nonresidential and residential construction decreases in 2020, demand for industry services is expected to decline. The only types of facilities that are expected to endure an increase in demand for operators' services are healthcare facilities. This is due to the importance of healthcare facilities in the battle against the coronavirus. Businesses The Architects industry in Canada derives the bulk of its revenue from fee-based contracts in the nonresidential building market. In 2020, an estimated 57.0% of industry revenue will be derived from this segment. The number of new nonresidential developments has rebounded, as investments in residential properties, including apartments, condominiums and other multifamily housing structures, has steadily grown over the majority of the five years to 2020. However, commercial construction activity stalled significantly in 2015, 2016 and in 2020 as falling crude oil prices, a key export commodity in Canada, led to declining building activity, especially in resource-rich provinces such as Alberta. Governments, nonprofit organizations and public institutions IBISWorld projects governments, nonprofit organizations and public institutions will account for an estimated 30.6% of industry revenue in 2020. Architects may provide services for transportation and infrastructure development projects, such as the construction of a new airport. In addition, architectural services are commonly needed for public and municipal projects, such as the construction of a new arts centre, educational building or healthcare facility. Over the past five years, this segment has benefited from steady levels of government spending, as stimulus spending for infrastructure products were allocated during the credit crises and economic recession. Moreover, the rising popularity of public-private partnerships 23 IBISWorld.com Architects in Canada 54131CA September 2020 (PPPs) helped provide steady demand for architectural services related to institutional and public works projects. PPPs are unique funding structures, whereby the private sector is responsible for the design, engineering, construction and overall financing of public infrastructure projects. The government later leases these assets from the private sector for long durations, often lasting up to 30 years. Homeowners and individuals The industry commonly provides services to homeowners and individuals, including new home construction, renovations, remodels, additions, alterations and historic preservations. Combined, these services will account for an estimated 12.4% of industry revenue in 2020. Revenue from renovation-related services has grown over the past five years, as rising employment and disposable income levels during the majority of the period enabled homeowners to invest in home improvements, remodels and expansions. Although this expansion is expected to slowdown in 2020 due to the coronavirus pandemic, once economic activity begins to improve, demand from homeowners and individuals is expected to pick back up. International Trade Exports in this industry are Low and Steady Imports in this industry are Low and Steady While the Architects industry in Canada does not participate in trade, Canada is known as a net exporter of architectural and engineering services. Canadian architecture firms often engage in business activity outside of the country, predominantly in the United States. 24 IBISWorld.com Architects in Canada 54131CA September 2020 Business Locations Business Concentration in Canada YT NU NT NL QC BC MB AB SK PE NB ON NS Percentage of Establishments (%) 0 13 26 39 Architects in Canada Source: IBISWorld Demand for operators in the Architects industry in Canada is ultimately dependent on the financial, demographic and economic trends that affect the construction industry. As a result, the geographic spread of industry activity generally corresponds with the distribution of economic and construction activity across Canada, with a skewed representation of activity in major metropolitan areas. According to Statistics Canada, four provinces, Ontario, Quebec, British Columbia and Alberta, are estimated to account for over 90.0% of total industry revenue in 2020. The same four provinces comprise the highest proportion of industry activity in terms of establishment concentration. In 2020, Ontario is expected to account for 39.1% of industry establishments. Industry operators in this region have benefited from an increase in downstream demand for design and planning services related to office construction over the five years to 2020, as Ontario is a major hub for the technology and finance industries. Ontario is also Canada's most populous region, accounting for an estimated 38.8% of the nation's total population. Over the past five years, industry revenue in this region has also been driven by architectural services for residential projects, such as multifamily and condominium construction, especially in expanding urban centres such as Toronto. 25 IBISWorld.com Architects in Canada 54131CA September 2020 Quebec contains the second-largest proportion of industry establishments, accounting for 23.1% of industry locations in 2020. The region has a high share of Canada's population, accounting for more than 8.5 million people, which has helped drive industry revenue related to residential building projects. In addition, Quebec is home to a thriving industrial and manufacturing sector, which has contributed to architectural service revenue for nonresidential building projects. British Columbia and Alberta comprise the next highest shares of establishments, accounting for an estimated 19.9% and 10.8% of industry establishments in 2020, respectively. British Columbia has more than 5.0 million people, and increased immigration into urban centres, such as Vancouver, has helped drive architectural revenue related to residential construction. In Alberta, strong global demand for energy has helped drive architectural design and planning for public infrastructure projects, as well as privately funded industrial and commercial building projects. However, given the rampant declines in global crude oil prices in 2015, 2016 and 2020 along with rail constraints in western Canada, demand for these types of projects is anticipated to remain depressed in 2020. 26 IBISWorld.com Architects in Canada 54131CA September 2020 Competitive Landscape Market Share Concentration 27 Concentration in this industry is Low The Architects industry in Canada is highly fragmented and comprises a high portion of small- and medium-sized enterprises. IBISWorld estimates that in 2020, nearly 60.0% of industry establishments are nonemployers. The industry's low level of concentration means that no operator holds a dominant position in the market. This is partly due to the low start-up costs among other low barriers to entry associated with establishing a practice. Although market share concentration is low, with the top four architecture firms accounting for an estimated 6.8% of industry revenue in 2020, smaller architecture firms find it hard to compete for high-profile jobs. IBISWorld.com Architects in Canada 54131CA Key Success Factors September 2020 IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: Having contacts within key markets: Having an established network and sound reputation among key players, including construction and engineering firms, enhances the likelihood of being invited to tender on contracts. Access to highly skilled workforce: Work in this industry is highly skilled, as architects must possess a graduate education and years of industry-relevant experience. As a result, successful companies in this industry must demonstrate the capacity to attract and retain a skilled workforce. Ability to quickly adopt new technology: The ability to offer clients the latest in technology using computer-aided design and 3D computerized models is beneficial to success. Ability to compete on tender: Companies in the industry must be able to compete for tendered projects and generate ongoing and repeat, nontendered work, which may be less price sensitive. Effective cost controls: It is beneficial to establish effective cost controls over all project work, particularly for direct labour input for projects that require extensive staff and working hours. Ability to establish remote work arrangements for employees: The ability to set up efficient remote work locations is crucial for industry operators due to the high-powered computers and software used by workers. Employees must be able to access all the tools necessary for operations to be successful remotely. Cost Structure Benchmarks 28 IBISWorld.com Architects in Canada 54131CA September 2020 Profit Profit, measured as earnings before interest and taxes, is expected to account for 11.5% of industry revenue in 2020, down from 14.6% of revenue in 2015. This is mainly due to the COVID-19 (coronavirus) pandemic and the depressed economic conditions that have resulted from the global crisis. The decreases in residential and nonresidential construction along with a decrease in the overall business sentiment have greatly reduced demand for industry services, subsequently reducing the industry's profit margin in 2020. While profit varies based on company size, a high profit margin is largely the result of architecture firms' partnership and operating structure. Partners receive most or all of their income as a share of profit, rather than as salaries. As a result, a significant portion of this industry's wage costs is reported in the profit segment. However, proprietors and partners of architectural service firms do not solely compensate themselves with company profit. This phenomenon is exacerbated by nonemployers that almost solely report wages as profit. Wages Industry wages are estimated to account for 48.9% of revenue in 2020, up from 43.6% of revenue in 2015. This is due to increasing industry revenue and employment, which has enabled architecture firms to expand their operating budgets. Wages are this industry's largest cost, as the professional and planning skills necessary for architectural services require skilled labour. Although this industry will remain labour intensive, an increasing reliance on technologies, such as computer-aided design, is expected to prevent rampant wage increases over the five years to 2025. 29 IBISWorld.com Architects in Canada 54131CA September 2020 Purchases In 2020, an estimated 13.7% of industry revenue is expected to be used for purchases of supplies and information technology equipment, including architectural software licences and general administrative expenses for common office supplies and equipment. Purchases are estimated to have increased over the five years to 2020 as new technologies force operators to stay up to date on their software to remain competitive within the industry. Depreciation Depreciation costs in this industry are minimal, accounting for an estimated 1.4% of industry revenue in 2020. IBISWorld estimates this figure has decreased slightly over the five years to 2020. Marketing Architecture companies incur costs related to marketing, which account for an estimated 0.6% of revenue in 2020. With the majority of projects being processed through bids, many players invest in keeping their portfolio and website current. Rent Rent and lease costs are estimated to account for 3.6% of revenue in 2020. With an estimated 39.1% of industry establishments located in Ontario, the cost to do business is higher due to the province's resources. 30 IBISWorld.com Architects in Canada 54131CA September 2020 Utilities Utility costs are expected to account for 0.3% of revenue in 2020. These costs have been mostly stable in recent years, although the price of electric power has been on the rise over the five years to 2020. Other Costs Professional and business-related fees dominate the industry's other expenses. Architecture enterprises can split a project with another architecture company, with one operating as a lead architect and the other compensated as a temporary consultant. Other costs are estimated to account for 20.0% of industry revenue in 2020. For some specific design elements, the industry also relies on the consultation of engineering and construction firms. Basis of Competition Competition in this industry is Medium and Steady Internal competition Competition in the Architects industry in Canada is largely based on quality, as work in this industry is highly skilled. Hiring top talent can help attract clientele and drive business. The industry stages public design competitions, which provide a method of obtaining a best design solution to a particular building opportunity. Competitions are generally supported by industry associations and can challenge architects to develop innovative and 31 IBISWorld.com Architects in Canada 54131CA September 2020 artistic designs. They can also help establish an architect's reputation and open industry operators to new ideas and talent. Architects must combine design creativity with structural feasibility. At the same time, they must be cognizant of a client's needs, as well as the time and costs involved with a project. Operators in this industry also commonly compete on a competitive bidding process. Therefore, price differentiation is an important element of competition. The most common method for charging clients is by calculating fees as a share of the total value of the construction project. However, jobs can also be charged on an hourly rate or as a lump sum based on the time required to complete the project. In addition, industry operators compete over capacity, which enables companies to deliver clients total design and construction solution that covers planning, design and outfitting. Architects may also develop strategic partnerships with engineering and construction firms, building upon the skills and reputation of these industryrelated operators. External competition Architects compete with integrated engineering and construction firms offering in-house design capabilities and a total upfront cost for a construction project. These larger multidisciplined companies offer a one-stop shop in technical and design services (e.g. engineering, surveying, drafting, landscape design, project management and architectural services). Barriers to Entry Barriers to entry in this industry are Barriers to entry in the Canadian Architects industry are low. According to Statistics Canada data and IBISWorld estimates, almost 60.0% of architectural establishments are nonemployers. Many architects operate businesses from home or in a shared office environment. Limited capital costs are associated with establishing a practice, similar to the costs of establishing any small business. Low and Steady Barriers to entry checklist Competition Concentration Life Cycle Stage Medium Low Mature Technology Change Medium Regulation & Policy Medium Industry Assistance Low However, the industry's low concentration means that it can be difficult for new entrants to compete for high-profile jobs. Operators with an established reputation tend to get work with high-value clients. Furthermore, large operators are expected to have the capacity to provide additional services beyond basic design, which can also pose a barrier to entry for operators that want to take on large projects or operate on a global scale. To be recognized as an accredited architect in Canada, an individual must hold at least a bachelor's degree from an accredited school of 32 IBISWorld.com Architects in Canada 54131CA September 2020 architecture. In addition, they must be registered with the provincial or territorial association of architects in the region of work. Industry Globalization 33 Globalization in this industry Low and Steady Due to the service nature of the Architects industry in Canada, and variations in the registration requirements for professional architects, industry globalization is minimal. However, the industry's largest players have international practices with offices across the globe. For instance, aside from Perkins+Will's locations in the United States, four of the company's remaining nine offices are located in Canada. In addition, B+H Architects has offices outside of Canada, specifically in Seattle, Shanghai, Singapore, Delhi and Dubai. IBISWorld.com Architects in Canada 54131CA September 2020 Major Companies Major Players THERE ARE NO MAJOR PLAYERS IN THIS INDUSTRY Other Players B+H ARCHITECTS Founded in 1953 and headquartered in Toronto, B+H Architects (B+H) is a fullservice architectural design company with offices in Toronto, Vancouver, Calgary, Seattle, Los Angeles, Shanghai, Beijing, Hong Kong, Singapore, Ho Chi Minh City, Delhi, Doha and Dubai. The company specializes in commercial, industrial, healthcare, mixed-use, hospitality, residential and retail building planning and design. As with other players in the industry, many of the company's projects over the five years to 2020 have focused on environmentally friendly design. For example, B+H was the lead architect in designing the RBC Centre in Toronto. The building attained LEED Gold certification and was, at the time, the largest LEED construction project in Canada. More recent LEED projects include B+H's design of the Humber College Learning Resource Commons, a 260,000.0 square metre facility that houses a library, student hub and administrative offices. The project aimed to meet LEED Canada NC Silver standards for energy efficiency and was completed in April 2015. IBISWorld expects B+H's industry-relevant revenue to reach $30.5 million in 2020. IBI GROUP INC. Founded in 1974, IBI Group Inc. (IBI Group) currently has 64 offices located across the world, including more than 15 offices in Canada. The company designs high-rise residential towers, hotels and industrial buildings, as well as education, retail and healthcare facilities. Relevant to this industry, the company has more than 2,700 architects on staff and over 180 LEED-accredited professionals specializing in environmentally responsible design. According to the company's latest annual statement, more than 55.0% of company revenue is generated in Canada. Recent projects include the Algonquin College Robert C. Gillett Student Commons for Algonquin College's Woodroffe Campus. The $42.0 million building features a 700-seat auditorium and was awarded LEED Gold for its energy efficiency and environmental design, as well as the Award of Excellence in 2013 from the Canadian Design-Build Institute. IBI Group also worked on a joint venture with Perkins Eastman Black Architects for the Women's College Hospital Capital redevelopment project. This $350.0 million facility, completed in 2016, was the first ambulatory care hospital designed specifically for women-focused healthcare services. In addition, IBI Group completed the design concept of Capital One's new Canadian office in Toronto in 2018. The company has reported strength in its Canadian building and design practices related to mixed-use and residential developments. This growth has largely been driven by increasing rates of urbanization and metropolitan redevelopment projects across Canada. As a result, demand for architectural services related to condominiums, office towers, hotels and other developments has risen over the five 34 IBISWorld.com Architects in Canada 54131CA September 2020 years to 2020. For instance, IBI Group is currently designing Parq Vancouver, resort that contains a casino, two hotels, restaurants and a convention centre. The facilities have since achieved LEED Gold-certified status. Additionally, IBI Group also reported an increase in design projects related to transportation, accessibility and communication systems that help connect residents to these new multifamily developments. In July 2015, IBI Group was selected as part of a larger consortium of architecture and engineering firms to design, build and maintain the Eglinton Crosstown Light Rail Transit (ECLRT) project. This transit project is part of the Metrolinx's Regional Transportation Plan, and will include a 19.0-kilometre span of 25 rail stations and stops. IBISWorld projects IBI Group's industry-relevant revenue will total $167.0 million in 2020. M. ARTHUR GENSLER JR. & ASSOCIATES INC. Founded and headquartered in San Francisco in 1965, M. Arthur Gensler Jr. & Associates Inc. (Gensler) is a US architecture and design firm. The company has over 6,000 professionals in over 45 locations in the United States and internationally. However, only two Gensler offices are located in Canada, one being in Toronto and the other in Vancouver. The company's areas of expertise include aviation, educational institutions, retail, office buildings, residential living centres and more. A company with many accolades, Gensler has generated the most revenue from architectural services every year since 2012, albeit on a global basis. However, Gensler's operations in Canada are not as vast as its operations in the United States, limiting the company's market share. In 2020, IBISWorld estimates Gensler will generate $67.7 million in industry-relevant revenue. PERKINS + WILL CANADA Perkins + Will Canada is part of Perkins + Will, an international architectural and design firm employing more than 2,000 professionals in 25 cities across the world. Perkins + Will Canada was formed from a three-way merger between Vermeulen Hind Architects, a leader in healthcare architecture; Shore Tilbe Perkins + Will, a company specializing in civic and recreational architecture; and Vancouver-based Busby Perkins + Will, an integrated architecture, interiors and planning firm specializing in commercial and public building design. These companies provide architecture, landscape design and branded environments to government and commercial clients across Canada. The company is widely known for its green and LEED design practices, and was named one of Canada's Greenest Employers by the Globe and Mail in 2013. In 2014, Perkins + Will received the Most Sustainable Building of the Year award from the World Architecture News for its VanDusen Botanical Garden Visitor Centre. Located in Vancouver, this LEED Platinum-rated structure uses on-site renewable energy sources. In 2016, Perkins + Will announced construction was completed on the University of British Columbia's Orchard Commons, a new academic and student housing hub, which combines student housing and academic spacing into the same facility. Continued demand for education, institutional and environmentally conscious projects in Canada will continue to push revenue up for Perkins + Will Canada, reaching $28.3 million in 2020. 35 IBISWorld.com Architects in Canada 54131CA September 2020 Operating Conditions 36 IBISWorld.com Architects in Canada 54131CA Capital Intensity September 2020 The level of capital intensity is Low The Architects industry in Canada exhibits a low level of capital intensity. IBISWorld estimates that for every $1.00 spent on labour, industry operators will allocate $0.03 to capital. The industry is highly dependent on labour, as architects tend to be highly educated and require a specialized set of skills to provide clients with satisfactory design and planning solutions. A reliance on technology, specifically the use of computeraided design, has slightly increased capital spending over the past decade. Technology And Systems Potential Disruptive Innovation: Factors Driving Threat of Change Level Factor Very High High Moderate 37 Rate of Innovation Rate of Entry Ease of Entry Disruption Description Very Likely A ranked measure for the number of patents assigned to an industry. A faster rate of new patent additions to the industry increases the likelihood of a disruptive innovation occurring. Likely Annualized growth in the number of enterprises in the industry, ranked against all other industries. A greater intensity of companies entering an industry increases the pool of potential disruptors. Potential A qualitative measure of barriers to entry. Fewer barriers to entry increases the likelihood that new entrants can disrupt incumbents by putting new technologies to use. Low Innovation Concentration Unlikely A measure for the mix of patent classes assigned to the industry. A greater concentration of patents in one area increases the likelihood of technological disruption of incumbent operators. Very Low Market Concentration Very Unlikely A ranked measure of the largest core market for the industry. Concentrated core markets present a low-end market or new IBISWorld.com Architects in Canada 54131CA September 2020 Level Factor Disruption Description market entry point for disruptive technologies to capture market share. The industry has a high rate of new patent technologies but limited concentration. This higher rate of new technologies creates a greater pool of potential disruptors. The range of patenting technologies is broad, which limits the threat of disruptions niche areas. A lack of concentration in patent types creates an environment where incumbent companies are more likely to have sustaining innovations in more areas. The industry structure creates a moderate level of entry barriers, which is coinciding with a high rate of new competitors entering the industry. This high rate of entry creates a significant pool of potentially disruptive entities and the industry structure does not significantly affect their growth potential. Major market segments for industry operators are relatively diversified. The spread of market segments suggests that there are limited entry points other than those already served my incumbent operators. The most relevant disruptive force in the Architects industry in Canada is the use of virtual reality, artificial intelligence, drones and open-source design. Large operators have used these new innovations to schedule designs and recognize any violations early in the process. In addition, open-source design enables for manufacturing efficiency and faster productivity. Furthermore, drones assist with each step of the design, production and review process for developers. With the overall construction market influenced by these products, architects are expected to know how and when to use them to be cost efficient. The level of technology change is Medium The Architects industry in Canada has a medium degree of technological change. Technology is evident in the computerization of office activities, the use of mobile communication and, particularly, in computer-aided-design applications. Models using 3D technology have also emerged as a new service area for clients. One area of emerging technological changes involves growing legislation that mandates construction in developed economies be energy efficient both in design and in the materials used. Energy-efficiency design parameters for homes have operated in most Organisation for Economic Co-operation and Development (OECD) countries since the mid-2000s and typically involve a four-star or five-star energy rating applicable to materials used (e.g. double-glazed windows), design (e.g. northfacing windows) and thermal properties (e.g. ceiling and wall insulation). Green building design has become increasingly important in recent years, whether or not local laws mandate it. In 1998, the US Green Building Council developed the Leadership in Energy and Environmental Design (LEED) Green Building Rating 38 IBISWorld.com Architects in Canada 54131CA September 2020 System. Shortly after, in 2002, the Canada Green Building Council (CaGBC) was established to advocate for green building policies across the country. Revenue Volatility The level of volatility is Medium Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility threshold. Over the five years to 2020, the Architects industry in Canada has exhibited moderate revenue volatility. Changes in industry revenue have been varied, and include a growth of 10.7% in 2017 and an anticipated decline of 9.5% in 2020. The industry covers many services related to building and construction. Over time, demand from individual markets for industry services can fluctuate significantly. For instance, architectural revenue related to office construction is driven by high employment and strong corporate profit, which is tied to the level of white-collar workers. Interest rates are also important in determining the affordability of borrowing money to finance projects. Regulation & Policy The level of regulation is Medium and is Steady The Architects industry in Canada has a medium degree of regulation. In Canada, the practice of architecture is regulated by individual provinces and territories that delegate this responsibility to the associations of architects through legislation. These provincial associations are responsible for the conduct of 39 IBISWorld.com Architects in Canada 54131CA September 2020 architects within their territories. Thus, these associations operate as selfregulatory bodies. In addition to these self-regulatory functions, provincial and territorial associations commonly pass statutes, such as the Architects Act of Ontario, which sets out the type and sizes of buildings that must be designed by registered architects. Some other provincial regulations include an increasing focus on reducing greenhouse gas emissions. This has become an increasing focus over the five years to 2020, as environmental preservation has become an important issue in every industry. The BC Energy Step Code and the Canada Green Building Council are two organizations that focus on designing buildings that require a certain level of energy efficiency and by reducing greenhouse gas emissions during the construction process. These types of environmental regulations are expected to increase over the five years to 2025. In Canada, to be recognized as an architect, an individual must hold a bachelor's degree from an accredited school of architecture, have completed an internship period under the supervision of a registered architect and pass a registration examination. Industry Assistance The level of industry assistance is Low and is Steady The Architects industry in Canada is not provided with any direct government assistance. However, each region has its own provincial or territorial association of architects, which promotes the industry, administers standards, lobbies the government and operates as a self-regulating organization for its members. Among the largest of these associations is the Ontario Association of Architects (OAA), whose membership totals more than 7,500 people and 1,911 architectural practices, according to the OAA's 2019 annual report (latest data available). In addition, due to the COVID-19 (coronavirus) pandemic, operators can receive governmental aid from Canada's COVID-19 Economic Response Plan. Some plans that will aid industry operators include the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Business Account interest-free loan (CEBA) and more time to pay income taxes, among other crucial plans aimed to keep businesses afloat during this economic crisis. The CEWS will enable operators to avoid layoffs by getting 75.0% of an employee's wages covered. The CEBA will permit operators to take out interest-free loans of up to $40,000 to help cover their operating costs. The Canadian government is also permitting all businesses to defer paying income taxes until after August 31, 2020. These forms of governmental aid will be crucial for industry operators since over 90.0% of industry establishments employ 20 people or fewer. 40 IBISWorld.com Architects in Canada 54131CA September 2020 Key Statistics Industry Data Year Revenue IVA 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 ($m) 3,577 3,653 3,707 3,646 3,968 4,168 4,612 4,791 4,796 4,338 4,626 4,859 5,021 5,149 5,268 ($m) 1,914 1,968 2,029 2,097 2,249 2,433 2,797 2,935 2,996 2,594 2,922 3,072 3,183 3,248 3,302 Annual Change 41 Year Revenue IVA 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 (%) -2.67 2.12 1.48 -1.65 8.81 5.04 10.6 3.89 0.08 -9.54 6.62 5.03 3.33 2.55 2.30 (%) -1.70 2.82 3.12 3.34 7.27 8.16 15.0 4.91 2.07 -13.4 12.6 5.15 3.59 2.05 1.66 Estab. Enterprises Employment Exports Imports Wages (Units) 5,939 5,930 6,530 6,705 6,815 6,975 6,974 7,084 7,014 6,886 7,082 7,246 7,375 7,483 7,594 (Units) 17,831 17,796 17,716 18,056 19,262 21,989 24,534 25,591 26,479 25,157 26,579 27,824 28,795 29,556 30,218 ($m) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A ($m) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A ($m) 1,381 1,415 1,427 1,474 1,605 1,737 1,897 1,996 2,131 2,005 2,122 2,223 2,300 2,360 2,414 Estab. Enterprises Employment Exports Imports Wages (%) -3 -0 -0 2 7 14 12 4 3 -5 6 5 3 3 2 (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A (%) -1.49 2.45 0.87 3.24 8.90 8.23 9.21 5.19 6.76 -5.90 5.84 4.75 3.45 2.62 2.24 (Units) 6,027 6,017 6,626 6,804 6,917 7,080 7,083 7,200 7,129 6,964 7,179 7,358 7,496 7,610 7,728 (%) 3 -0 10 3 2 2 0 2 -1 -2 3 2 2 2 2 (%) 3 -0 10 3 2 2 -0 2 -1 -2 3 2 2 1 1 Domestic Value of Demand nonresident ial constructio n ($m) ($b) N/A 164 N/A 176 N/A 184 N/A 191 N/A 173 N/A 156 N/A 160 N/A 161 N/A 161 N/A 143 N/A 149 N/A 160 N/A 167 N/A 173 N/A 179 Domestic Value of Demand nonresident ial constructio n (%) (%) N/A 5.65 N/A 6.93 N/A 4.83 N/A 3.79 N/A -9.46 N/A -9.93 N/A 2.17 N/A 0.94 N/A 0.00 N/A -11.1 N/A 4.33 N/A 7.30 N/A 4.30 N/A 3.59 N/A 3.29 IBISWorld.com Architects in Canada 54131CA Key Ratios 42 September 2020 Year IVA/Revenue Imports/Demand Exports/Revenue 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 (%) 53.5 53.9 54.7 57.5 56.7 58.4 60.6 61.2 62.5 59.8 63.2 63.2 63.4 63.1 62.7 (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Revenue per Employee ($'000) 201 205 209 202 206 190 188 187 181 172 174 175 174 174 174 Wages/Revenue (%) 38.6 38.7 38.5 40.4 40.5 41.7 41.1 41.7 44.4 46.2 45.9 45.8 45.8 45.8 45.8 Employees per estab. Average Wage 2.96 2.96 2.67 2.65 2.78 3.11 3.46 3.55 3.71 3.61 3.70 3.78 3.84 3.88 3.91 77,455 79,512 80,571 81,618 83,325 78,999 77,325 77,984 80,468 79,699 79,845 79,902 79,878 79,865 79,873 IBISWorld.com Architects in Canada 54131CA September 2020 Additional Resources Additional Resources Ontario Association of Architects http://www.oaa.on.ca Royal Architectural Institute of Canada http://www.raic.org Statistics Canada http://www.statcan.gc.ca Canada Green Building Council http://www.cagbc.org Industry Jargon COMPUTER-AIDED DESIGN (CAD) The use of computer technology to aid in the design and drafting of a part or product using software tools that can create 2D drawings or 3D models. GREEN BUILDING A building designed to reduce environmental impact and be resource efficient. LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN Also known as LEED, an environmental building certificate program established under the US Green Building Council that certifies buildings that meet energy-efficiency and green requirements. Glossary Terms BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is $0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of labour. 43 IBISWorld.com Architects in Canada 54131CA September 2020 CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the "real" growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using Statistics Canada's implicit GDP price deflator. DOMESTIC DEMAND Spending on industry goods and services within Canada, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENT The number of permanent, part-time, temporary and casual employees, working proprietors, partners, managers and executives within the industry. ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTS Total value of industry goods and services sold by Canadian companies to customers abroad. IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in Canada. INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. 44 IBISWorld.com Architects in Canada 54131CA September 2020 INDUSTRY VALUE ADDED The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry's contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%; and high is more than 35%. LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry's life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry's products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. REGIONS Prairies | AB, SK, MB Atlantic | NB, NS, PE, NL Territories | YT, NT, NU VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%. WAGES The gross total wages and salaries of all employees in the industry. 45 IBISWorld.com IBISWorld helps you find the industry information you need – fast With our trusted research covering thousands of global industries, you’ll get a quick and intelligent overview of any industry so you can get up to speed in minutes. In every report, you’ll find actionable insights, comprehensive data and in-depth analysis to help you make smarter, faster business decisions.If you're not yet a member of IBISWorld, contact us at +1-800-330-3772 or info@IBISWorld.com to learn more. Disclaimer This product has been supplied by IBISWorld Inc. ('IBISWorld') solely for use by its authorized licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. In the event that the purchaser uses or quotes from the material in this publication - in papers, reports, or opinions prepared for any other person - it is agreed that it will be sourced to: IBISWorld Inc. Copyright 2020 IBISWorld Inc. IBISWorld.com +1-800-330-3772 info@IBISWorld.com Х Assignment: Porter's 5 Forces Posted Jan 25, 2021 9:00 AM · Edited Conduct a Porter's 5 Forces analysis. See the course outline for instructions and refer to Porter's article "How competitive forces shape strategy” in the readings. You must upload an electronic copy on Avenue which will be subjected to an assessment of unique authenticity via Turnitin. Please note, you must only use the information in the industry note for your analysis. There is no need for a bibliography or citations of external sources. All references to facts or numbers from the industry note are known to the evaluators so there is no need to reference where you found them either. The total report is limited to 1 page of text. Your full name, student #, and section #, must be at the top right corner of the page. Use 1-inch margins, 12 point font, single-spaced, and headings. You must specify whether each force is a high, medium or low and then make a final determination of the overall attractiveness of this industry based on your analysis. Attachment(s); Architects in Canada Indust... (2.02 MB)
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