Redrawing Plans for the ‘90s : A Cooler Real Estate Market Has Urban Planners, Architects and Interior Designers Scaling Back and Looking Abroad for Work

The dozens of urban planners, architects and interior designers who inhabit the nondescript neighborhood of low-slung buildings near John Wayne Airport are at a turning point.

If the real estate industry continues to shrink, as many experts expect, these small businesses can expect to get smaller too--and to have to look elsewhere for new business.

And that is, in fact, already true of a number of them.

Several companies have gone abroad for work, particularly to other Pacific Rim countries but also to Mexico, Europe and Africa.

CYP Inc. of Costa Mesa, for instance, is renovating five castles in Eastern Europe, turning them into casinos, museums or hotels. EDAW, down the road, is working in Japan landscaping an airport on a man-made island in Osaka Bay, part of one of the largest construction projects in the world.

“Frankly, work in the United States is virtually at a stop,” says Donald Corbin, CYP chairman. “There’s no heartbeat at all. People are asking: ‘How do I get out of here and generate more work overseas?’ ”

Local design firms have also been reducing their staffs since last year; some have gone through second and third rounds of layoffs, shrinking to as few as half the number of people they had a year ago.

“It’s a mystery to me where all these people go,” says William F. Schulz, an executive at EDAW. “We’re getting resumes from all over the country--so many we can’t even respond anymore; we’d need a full-time secretary to do it.”

Orange County has one of the largest collections of design and planning companies in the nation. The reason: Transforming what was mostly farmland in the 1950s into a vast metropolitan area with several million residents was such a big job that it created a sizable development industry, and the design firms grew right along with it. A good many of the design firms hang their shingles in an unprepossessing industrial neighborhood in Costa Mesa just west of the airport.

“I don’t know of anyplace in the United States where there’s a higher concentration of architects and planners than in Orange County,” says Walt Richardson, chairman of Richardson Nagy Martin Architecture Planning in Newport Beach. Richardson has been around Orange County since the 1960s.

In the past, most of the nation’s “name” architects would have disdained jobs designing tract housing and planning subdivisions. But here, the locals did it happily--and grew rich. And architecture has become increasingly important since the 1950s, when home builders sketched their own designs on napkins. It was a simple matter of economics: Competition among builders here became so fierce that one of the few ways to overcome it was to design a better house. It made for lots of design work.

In addition, Orange County-based design firms moved into other U.S. markets such as the Pacific Northwest, Florida and the East Coast.

Now such firms as Richardson’s are catching on in places like Japan, where the company recently designed a Western-style housing tract outside Tokyo “that was literally intended to re-create Beverly Hills,” Richardson says. The mansions sell for as much as $7 million. That’s about $1,200 a square foot; even in ultra-expensive Southern California, you can expect to pay $200 a square foot at most for something comparable. The Japanese houses are said to be selling well nevertheless.

“I think it’s kind of unfortunate,” Richardson says, “but the big developers there want Western architecture.”

And it’s nice to have the work because things are certainly tough here.

Richardson Nagy Martin has cut a third of its 95-member staff since last fall; CYP, a third of its 300-member crew. EDAW went through its own little shakeout a couple of years ago and therefore has not had to cut any positions, but it says times are still tough.

And these are the big guys--although by the standards of many other industries they would be considered small businesses. CYP’s revenues are about $25 million a year; Richardson Nagy Martin’s about $8 million; and EDAW, which is actually based in San Francisco, about $20 million.

Some of the smaller guys are even more hard-pressed.

“We’ve seen some firms close that have been around a long time,” says Thomas Pagliuso of Thomas Pagliuso Design Associates of Costa Mesa, a $3-million company.

Doing business abroad is not easy, though. Most firms that do well in other countries have been working at it for several years. EDAW had partners who taught landscape architecture and therefore had foreign contacts from the academic world. Pagliuso met a Japanese developer in a bar in the 1970s and was offered his first contract in Japan a year or so later. Richardson had cultivated Japanese developers who recommended him to others.

Many of these design firms are excited about the possibilities in Eastern Europe, where the domestic design firms are seen here as weak competitors. In the German city of Dresden (formerly in East Germany)--some of which still bears the scars of World War II bombing--CYP is reconstructing a 17th-Century castle of which there were only three walls left standing. On the outside, plans call for it to look the way it did before the war; inside, it is to be a modern hotel.

Other companies think that the Middle East, where there was a rich market for international design firms and construction companies in the 1970s, may re-emerge as a hot spot with the rebuilding of Kuwait. As for Mexico, resort areas there have already been hiring many Southern California firms to lay out golf courses, design clubhouses and plan resorts.

There are, however, several pitfalls in working abroad. The travel, for one. Walt Richardson, for instance, was in Europe twice last week, and he took off again Sunday. Then there is the challenge of negotiating with people from a different culture. There also is the challenge of writing a contract so that the profit is not wiped out by taxes, which can run high on service companies in some Pacific Rim countries.

In addition, some clients will insist on paying in local currency, which can mean a slimmer paycheck when the money is converted into U.S. dollars. And in countries such as Japan, which bars its doors to many foreign goods, there are other impediments to foreign service companies doing business there.

Still, most of the bigger firms will continue to work abroad if they want to stay big. Although home building is making a mild comeback in Southern California, the office market is so oversaturated that it is unlikely that more than a few buildings will be built in the 1990s. There will, most experts say, be far less commercial building in the next 10 years than there was in the 1980s, when developers built whether or not there was an immediate need.

As a result, firms such as Richardson Nagy Martin, which concentrates on housing design, say they expect to find many more design firms crowding into the residential market.

But even with new foreign jobs, the design business overall is likely to continue shrinking from its heyday in the 1980s. And so will many other businesses tied to real estate, experts say.

“Everybody’s finding the market has dramatically changed,” says Kathleen L. Davis, executive director of the local chapter of the American Institute of Architects. “Everybody is tightening their belt.”

Says Thomas Pagliuso, who just opened an office in Milan, Italy: “You can’t sit here and hope to get work. You’ve got to get out.

“But it’s tough to do, and it’s not a great way to practice. For one thing, you spend half your time sitting on an airplane.”