2 min read November 2022 — In case of a recession, the strategic response of GFF Architects is to diversify. “We want to have a diverse design practice that’s not fully dependent on one single sector, such as multifamily apartment developers,” said Chairman and CEO Evan Beattie, in an interview with Invest:.
With inflation rising along with interest rates, some experts see a recession looming. How will GFF face that?
We’re very focused on maintaining diversity in our work. We never want one market sector to represent a very large percentage of what we’re doing from a design perspective. Looking forward, we’re investing heavily in pursuing additional institutional work, higher-education projects and civic projects. Those are the areas of focus for us to maintain diversity in our work and prepare for a potential recession, which may make it harder for our developer clients to get construction loans. Having a vibrant practice that’s not fully dependent on developers is an important part of our strategy.
What emerging trends are going to be sticking for the future?
I think increased investments in health and wellness by corporations is something we’re going to continue to see in the long term. Flexible office spaces that can encourage collaboration while also providing accommodations for maintaining distance are going to be important. At GFF, we’ve moved to having a minimum of three days in the office and allowing employees to work from home up to two days a week. That’s worked well for us. Having that flexibility for employees has been a good thing and helped us recruit new talent. Many of the corporations that we design office spaces for have moved to similar blended programs. When you come to the office now, it is important that you have great opportunities for collaboration, where employees are energized and you’re investing in strategic training and collaboration.
The office market sector is where we’re going to see the most change. But even on the residential side, we’ve seen changes in the way people live and what they prioritize due to the pandemic. We’ve implemented changes in apartment unit design where now we are thinking more about how, through thoughtful design, a resident in even a small studio apartment can have a great experience working from home. Our thinking about amenity and common spaces has also changed. We’re placing more focus on both indoor and outdoor amenity spaces and creating indoor/outdoor rooms that function well throughout the year, so that residents can work from home or their office while being outside.
What would you consider the key challenges facing the industry now?
High rates of inflation on building materials and labor have been the biggest challenge of the last 12-months, but now we see strong signs of a recession on the horizon. Typically, when interest rates go up as dramatically as they have for the last three months, that has an impact on the viability of projects. It has an impact on what people can pay for a project once it’s built and stabilized. Most of our clients are building something to sell and if the interest rates are higher, and rent increases aren’t keeping up with rising interest rates, that building is worth less and the potential buyers can afford to pay less for it.
There’s almost certainly another meaningful industry disruption in our near future. We think that Texas, and the North Texas market in particular, are well-positioned to bounce back quickly from a recession. We still have relatively affordable housing stock here and the cost of living is low. We have a low tax environment and a low regulatory environment. In a recession, we think we’re going to see corporate relocations to our region accelerate as companies look to cut costs and find more affordable places to be headquartered.
What opportunities do you see in new construction in North Texas?
As North Texas has grown, there’s an increasing appetite for density and tall buildings, with people who are moving to Texas from more mature cities on the coasts wanting to live and work in high-rises. There’s a great opportunity for us to reshape the built environment in North Texas by investing in these quality buildings and creating more density that encourages walkability and improved options for shopping and dining in the urban core of our cities.
Are greater density projects a trend for the long term?
There is an important sustainability aspect to high-density urban infill development. Suburban development requires more natural resources per home to be built, more concrete roads, impervious cover, and civil infrastructure to support single family home-oriented growth. In North Texas, we’ve benefited from having a lot of land that can support sprawling development, but creating an offsetting mix of urban density and walkable environments where car reliance is reduced is important to manage traffic and be more sustainable as a region. We are seeing many new mixed-use urban hubs being created in the suburbs north of Dallas and that is a good thing for our region.
Traffic levels declined during the pandemic and many companies have transitioned to blended office/work-from-home schedules. However, we are now seeing an increase in traffic and commute times, which should lead to a rise in demand for urban living. I am confident that we are going to see increased demand in our region for housing options that allow residents to live within walking distance of their offices over the course of the next several years.
What are the North Texas areas with the highest potential for projects?
Our offices are in Uptown Dallas and the area has seen tremendous growth over the last decade, with more residential and office high-rises built in our neighborhood than anywhere else in the region. We’ve designed a new 400-foot-tall office building for Granite Properties called 23 Springs that is breaking ground right now across the street from our office. It’s been exciting to be part of the Uptown’s renaissance. Downtown Dallas has also been making significant investments in parks and many older office buildings that were functionally obsolete for office use are being converted to residential use. We’ve taken most of our vacant buildings in the Downtown area and brought them back to life as hotels or apartments.
I think Downtown Dallas is at a tipping point. We’re going to see more and more new construction on the large surface parking lots, which have prevented the area from having the consistent walkability that we’ve achieved in Uptown. In the next decade, it is going to be exciting to watch Downtown Dallas mature as we see significant investment in new construction beyond just the remodeling efforts we’ve seen over the last 15 or so years.
What is your outlook for the next two to three years?
As we look forward to the next two years, maintaining diversity in our work is a critical consideration. We are still actively investing in talent and we’re looking to continue growing our team through training and investment in leadership programs. Something else that we’re doing that I think gives us a competitive advantage over many of our larger competitors is investing in growing the ownership of our firm by bringing on new partners.
Our primary strategic initiative in the next several years is to continue to diversify the ownership of our company with as many as six to eight new Principal owners. That’s something we can offer current employees who are motivated to help us grow, and new potential hires who we are recruiting to join our team.
For more information, visit:
