Spokane Journal of Business

NAC looks to education, health care to fuel robust growth

By Emily Proffitt

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Projects designed by Spokane firm top $400 million in recent years

One of Spokanes largest architectural firms, NAC|Architecture Inc., says its blueprint for growth has helped it corral projects with a total construction value of well over $400 million in recent years, and it expects to continue at a strong pace despite the softening economy.

NAC, which formerly was known as Northwest Architectural Co. before it merged with Los Angeles-based Jubany Architecture in 2006, has derived much of its recent growth from the construction boom in the sectors in which it specializeseducation and health care. Thanks both to population growth in Washington state thats leading to overcrowding in schools, and to aging baby boomers who are driving more health care and retirement center projects, the firm expects a steady stream of projects to continue filling its pipeline, says CEO Bruce Blackmer.

School districts and higher education institutions still have to accommodate their growth, which will continue to drive our growth for the next decade, Blackmer says. The aging baby boomers and their increasing demands on the health-care system also will be taking up a larger share of our work.

Meanwhile, NAC also is emphasizing its experience in sustainable design to seek an edge over competitors, Blackmer says. In addition, its growth strategy includes additional mergers, and the firm is talking with a number of potential merger candidates across the U.S., particularly in California. Its goal is to complete another merger next year, he says.

Last year, NAC had revenues of roughly $32 million, up from about $27 million in 2006, and its projecting its revenues will hit $35 million this year, he says. The firm, which was formed here in 1979, has a total of 160 employees at its offices in Spokane, Coeur dAlene, Seattle, and Los Angeles, and is looking to hire more, Blackmer says. It employs 65 people at its Spokane office, located at 1203 W. Riverside, including roughly 32 licensed architects and engineers. Firmwide, its looking to hire about 10 people, including about two here.

To accommodate growth at the three-story, 12,000-square-foot office it has occupied here since 1979, the firm is building a 10,000-square-foot addition that it expects to complete later this month, Blackmer says. After the project wraps up, the offices electrical engineering department, which has 12 employees and is in a separate space about a block to the east, will move into the addition, which will include 35 work stations, he says.

The $3 million expansion project also involves renovation of the firms longtime building, which will be completed this December, he says. Once that portion of the project is completed, the firms expanded office will be able to accommodate 75 people, giving it about eight spaces to grow into after its hires this year, he says.

NAC is working on a total of 300 projects, and while it now has about a one-year backlog of work, down from two years in early 2007, thats still substantially more than the three months the architectural industry considers adequate, he says.

While it focuses on projects in Washington, Idaho, Montana, and Southern California, the firm has been involved in projects across the U.S. and internationally. Education projects make up about 60 percent of its portfolio, while health care makes up about 25 percent, although Blackmer expects the health-care industry will exceed 30 percent in the next two years. The firms other specialties include laboratories, government, performing arts, recreation, hospitality, historic preservation, strategic planning, and the retirement industry.

NACs current and recent projects here include major reconstruction projects at Rogers High School and Shadle Park High School, which have a combined total cost of roughly $139 million; a $14 million business and social science building at Spokane Falls Community College; and a $10.8 million science and math building at Spokane Community College. They also include a roughly $12 million residence hall at Whitworth University; a $30 million renovation of and addition to Patterson Hall at Eastern Washington University; a $12 million design disciplines facility at Washington State University, in Pullman; and work on WSUs update of its master plan for the Riverpoint Campus here. It also designed the Fox Theater rehabilitation project downtown.

Projects outside Spokane that NAC has designed recently include a 30-unit luxury condo project in Coeur dAlene, where units sell for an average of $4.2 million; a $13 million medical-office building in Butte, Mont.; an $80 million Group Health Bellevue Medical Center; and a $46 million academic instructional center at Western Washington University, in Bellingham. Last month, the firms Seattle office landed three school projects in the Snohomish school district. An estimated cost for those projects hasnt been released yet, Blackmer says.

The firm generally targets projects that cost in total between $10 million and $50 million, he says. Architectural and engineering fees on a project typically run between 8 percent and 11 percent of the total cost.

NACs fees have increased in recent years largely because clients are requesting additional services, such as strategic planning, sustainable design, and construction management, Blackmer says. The firm started offering sustainable design services in the 1990s, before the movement started picking up steam, he says.

Green-building standards developed by the Washington, D.C.-based U.S. Green Building Council are administered through a program called the Leadership in Energy and Environment Design (LEED) Rating System, which is becoming a national benchmark for environmentally friendly development and construction practices. NAC has 24 LEED-accredited professionals on its staff, and its goal is to have every employee whos working on projects currently receive accreditation by the end of 2008. For its own expansion project, NAC achieved LEED silver certification, he says.

The state now requires certain levels of sustainability in publicly funded projects, and many of our private clients are setting high goals for their projects, Blackmer says. That drives up initial costs, but in terms of life-cycle costs, it can be less expensive. Its about taking a long-term view.

The firms Seattle office is growing more rapidly than its other offices, due largely to the growth in the number of school-age children on the West Side, he says. That office, which opened in 1983, has roughly 74 employees, including 35 architects.

Since these are public projects, our workload is driven, to a large extent, by bond issues, Blackmer says. Over the last decade, Washington voters have been optimistic about the future.

He adds, Theyve been less optimistic in the last two elections, and our backlog has reduced some, but increasing demands on classroom space and pressure on the school districts and higher education institutions has kept our workload up.

The firms most modest growth projections are for its Spokane office, based on the number of projects that are being initiated in the Inland Northwest, he says. One of the firms principals, R.G. Nelson, operates his practice out of a small office in Coeur dAlene, which is considered an extension of the Spokane office.

The Spokane office still will stay busy, though, thanks to increased connectivity among the firms offices, Blackmer says. Within the past two years, NAC has increased the efficiency of its computer network, so that offices now share information through project software, web cams, and videoconferencing tools. As a result, employees here can work more easily on projects in other locations, he says.

The growth in NACs L.A. office is driven largely by the size of the market it serves, so part of its growth strategy for that office involves taking market share away from competitors, he says.

We want to be a bigger player in that market, he says. Even if we can increase our market share by a fraction of a percentage point, it would drive up our growth considerably.

The firm also is exploring opportunities for international work, particularly in Asia and South America, out of its L.A. office. During the past year, the office has been pursuing leads for several projects in China that each exceed $100 million, he says.

Additionally, the L.A. office is focusing on increasing the percentage of its work devoted to health-care projects, Blackmer says. It has formed an association with another firm in Southern California that focuses solely on such projects. That firm is one of the candidates NAC is considering for a potential merger, he says.

One of the main challenges NAC is facing is melding the workplace cultures of each of its offices to form a single cohesive team, Blackmer says.

Another challenge is integrating contractors into the project team earlier on in the process, he says. The pervasive perception in the construction industry is that clients wont get the lowest price if they dont bid out every aspect of a project, but selecting a contractor before construction drawings are done can reduce change-order costs and make projects more economically feasible than the conventional bidding process, he asserts.

It saves money for the client, and, for us, instead of performing a policing function, we become partners with the contractors and our goals are pulled into alignment, Blackmer says. It makes the project more enjoyable instead of confrontational.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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