Architectural Services

SIC 8712

Companies in this industry

Industry report:

This classification covers establishments primarily engaged in providing professional architectural services. Establishments primarily engaged in providing landscape architecture services are classified in SIC 078: Landscape Counseling and Planning. Those primarily engaged in providing graphic arts and related design services are classified in SIC 7336: Commercial Art and Graphic Design, and those providing drafting services are classified in SIC 7389: Business Services, Not Elsewhere Classified.

Industry Snapshot

Design firms primarily engaged in providing professional construction-related design services constitute the architectural services industry. This industry includes companies that offer engineering design services related to architectural work, but does not include civil engineering or ship and boat design companies. Landscape architecture, graphic arts, and drafting disciplines are covered in separate classifications.

Aside from actually designing structures, architects typically are employed throughout all phases of the building process from conceptual planning through client construction. In 2009, an estimated 41,800 establishments employing approximately 270,500 people existed in this industry. About 96,480 architects (except landscape and naval) were working in the United States in 2008. Licensure is the highest form of industry regulation, and all 50 states require architects to be licensed.

After suffering from a deep recession in the late 1980s and the early 1990s, the architectural services industry began a steady rise into the 1990s. Consumer confidence mounted throughout the late 1990s, and the economy boomed. When weakening economic conditions slowed consumer spending in the early 2000s, falling interest rates bolstered the home construction sector, although the office construction sector began to slow at that time. Housing construction boomed during the mid-2000s, but in 2008, the bottom fell out of the real estate market as the economy sank into a recession. As a result, the number of new residential, commercial, and industrial building projects slowed significantly.

Organization and Structure

In 2009, of the architect membership of American Institute of Architects (AIA), which represented over 50 percent of all licensed architects in the United States, 54 percent were over 50 years old, 45 percent were between the ages of 31 and 50 years old, and just 1 percent was under the age of 30. Eighty-one percent of these architects work for an architectural firm (including sole proprietorships); 5 percent, for other design firms; 2 percent, for government; 2 percent, for universities, schools, or associations; 2 percent, for corporations; 1 percent, for construction firms; and 1 percent, for engineering firms (6 percent is unknown).

Architecture firms design a multitude of different structures for all sectors of the market. Office and apartment buildings, schools, military installations, churches, factories, hospitals, houses, and airport terminals are but a few of the facilities that they design for commercial, government, and private nonprofit organizations. While some firms specialize in serving one niche or a few related segments of the market, others are highly diversified and offer a variety of design services to all types of clients.

The Design Process.
Building design can be a complex, detailed, and painstaking endeavor. In addition to the important consideration of appearance, architects must also stress functionality, safety, and economy in the design process. Even one minuscule flaw in a volume of construction drawings can result in costly litigation and the erosion, or destruction, of a firm's reputation. More important than pleasing the potential users of any structure or satisfying personal design aspirations, architects must accommodate the client who commissions and funds a project.

Design programming is the first stage of the building process. Architects are often called upon at this point to determine what type of structure to erect. Marketing research, demographic analyses, regulatory constraints, and other factors all help to determine economically viable development options. Site selection and acquisition follow the design programming stage. The architect analyzes factors such as soils, drainage, utility availability, tax rates, and traffic patterns to determine where to build a project. If the client already has a parcel of land, the firm can help determine the financial and physical feasibility of developing the site.

After the client decides to build, the architect begins the conceptual design process. Schematic drawings and relational diagrams, prepared by the architect, allow the client to study possible options for developing the site. Crude models are often used to represent ideas in three dimensions. The conceptual design process eventually results in a hypothetical plan that is used to generate cost estimates and guide the development of more detailed elevations, cross-sections, models, and perspectives.

After developing a detailed design, the architect begins the bulk of the design work, which is detailed construction drawings. These highly detailed drawings determine accurate construction cost estimates and bids by contractors. They also dictate the quality of craftsmanship and materials to be used by contractors. Architects cooperate with engineers and other professionals to ensure that the design is technically appropriate and complies with legal guidelines. When the working drawings are complete, the architect usually takes bids on the project from contractors, awards a contract, and supervises construction to ensure that the contractor properly executes design details.

Although rates vary, most architects bill clients on a per-hour basis. The total bill for architecture and engineering design services is often in the range of 2 to 4 percent of the total construction cost of a project, but can be much more or less depending on the type of project or the level of involvement by the architect.

Types of Firms and Projects.
The three types of companies primarily engaged in providing architectural services are engineer/architecture (E/A) firms, architecture/engineer (A/E) companies, and architecture firms. Typically, an estimated 15 percent of the total billings by architectural firms are rendered by firms in the architectural services industry. Engineering and construction firms and other companies that offer services related to architectural work, such as surveying services, consume the bulk of the revenues.

Purely architectural firms bill strictly for architectural design work. They do not have engineers on staff and often offer limited construction management expertise. This segment supplied only a small percentage of all architectural services rendered by U.S. companies. A/E firms, while still emphasizing architectural skills, have engineers on staff with expertise related to architectural building design. Firms in this category typically account for a small percentage of industry billings.

E/A firms maintain architects on staff but emphasize engineering design services that are related to construction work. These firms produce roughly one-half of all industry billings and furnish the highest percentage of all architectural services rendered by U.S. firms.

Background and Development

Architects have been designing structures in return for compensation for more than 3,000 years. Although several famous architects designed well-known projects during the early history of the United States, such as Thomas Jefferson's Monticello in the early nineteenth century, an organized architectural profession did not exist in the United States until the 1850s. In fact, formal educational programs for architects were unavailable until the 1860s, with the establishment of the Massachusetts Institute of Technology, Cornell University, and the University of Illinois.

Prominent works which sprang from the fledgling architectural services industry in the middle and late nineteenth century included the Marshall Field & Company building in Chicago, the Wainright Building in St. Louis, St. Patrick's Cathedral in New York, and the Harvard Museum of Comparative Zoology in Cambridge. Prominent architects of the period who owned firms included James Renwick, Louis Agassiz, H. H. Richardson, and Louis H. Sullivan. Between 1900 and 1940, Frank Lloyd Wright, Germany's Mies van der Rohe, and France's Le Corbusier, among others, designed significant projects and had enormous influence on the profession. Famous works of this time included many office buildings, such as the Empire State Building and Rockefeller Center in New York.

It was not until after World War II that the U.S. architectural industry began to experience rapid growth and to become closely affiliated with building and construction industries. During that time, large corporations developed massive structures that projected wealth and distinction, and government expenditures for infrastructure and public works grew at an unprecedented rate. This development boom gave birth to many large architecture firms, such as Hellmuth, Obata & Kassabaum and Perkins & Will, that employed hundreds of architects. Skidmore, Owings & Merrill, one of the larger firms in the post-war period, designed projects such as the Connecticut General Life and Inland Steel Buildings. The General Motors Technical Center and Frank Lloyd Wright's Guggenheim Museum were other prominent landmarks that characterized the progression of the industry from the 1950s through the 1970s.

By 1983, however, new development activity was leading the architectural services industry into an era of unprecedented profit and growth. Deregulation of lending institutions, an influx of foreign investment dollars, and new tax laws all combined to generate a massive injection of capital into the commercial development industry. Between 1982 and 1985, the total amount of commercial space designed by architects ballooned from less than 700 million square feet per year to over 1.3 billion. At the same time, residential markets were also booming and the demand for new public construction increased. As a result, the total number of establishments in the architectural services industry jumped over 20 percent, from 14,089 in 1985 to a peak of 17,777 by 1987. During the same period, revenues leapt from $5.9 billion to over $9.8 billion, and industry employment shot up to nearly 140,000 from only 105,000.

In the late 1980s, the flow of capital for new design projects waned. The Tax Reform Act of 1986, which discouraged new construction, and a shortage of savings and loan capital were two of the various factors contributing to a slowdown in 1987. Architecture firms saw a significant decline in the number of design jobs available in many commercial and residential markets. In fact, by 1989, it was clear that the industry had fallen into a severe, and potentially prolonged, recession. Total new commercial development plunged to about one billion square feet in 1988, and fell to under 800 million square feet in 1989.

By the end of 1989, the market for architectural services appeared to many analysts to have bottomed out. Nevertheless, while most firms were on the ropes and struggling to survive the industry shakeout, the development market continued to plummet in 1990 and 1991. In fact, many office buildings that architects had designed in the late 1980s opened in the early 1990s without a single tenant; these became known as "see-through buildings." The total demand for new construction continued to fall from $410 billion in 1989 to about $358 billion in 1991. The market for residential design services was also hit hard, as new construction in that sector fell 14 percent in the same three-year period. Although many firms were able to stay afloat by emphasizing public works projects, which experienced expenditure increases of 9 percent between 1989 and 1991, most firms lost revenue.

In response to harsh market conditions, the architectural services industry became increasingly competitive in the early 1990s. As hundreds of firms closed their doors, most remaining companies quickly took measures to increase their market share and to maintain profits. In some cities, about 50 percent of all architects were laid off. Those hit hardest were young, inexperienced workers and older, highly paid employees. Firms were also reducing fees in an effort to undercut competitors. Most importantly, however, architecture firms were looking to new growth markets and technology to give them an edge in the 1990s.

Market conditions improved slightly from 1991 to 1992, indicating that the development drought was easing. The total value of new construction increased about 4 percent to about $423 billion. Although work in commercial markets, especially office building design, continued to decline, housing and public works design projects increased. Furthermore, spending in some commercial niche markets, such as health care, improved as much as 5 percent. Importantly, remodeling, retrofit, and repair construction for all sectors reached record levels in 1992, allowing many firms to boost billings on small maintenance jobs.

A survey of 100 design firms by Architectural Record in 1992 revealed that nearly half the respondents had realized a reduction in the construction dollar value of their commissions since 1990. The average decrease was between 10 and 25 percent, although some firms lost as much as 90 percent. Of the survey respondents, 34 percent reported that their workload was down, 24 percent said it was up, and 42 percent felt that it had stabilized. A similar survey by Engineering News-Record showed a 20 percent decrease in design work backlogs from early 1991 levels, indicating that work was becoming more difficult to secure.

Firms were taking a variety of steps to improve internal operations and increase competitiveness. Most firms were increasing their workload-to-staff ratio to save money and decreasing fees to attract more business. This was often accomplished by relying on part-time help from trained architects that were called on only when absolutely necessary. Popular trends were "hoteling," where employees would check into offices for short stints on special projects, or where several employees would use the same office but at different times of the day.

One of the most important internal changes for many companies was the increased use of technology to lower labor costs. In fact, 12 percent of respondents in the Architectural Record survey indicated that despite an increase in billings they had elected to diminish the size of their staff. Computer automated design (CAD) systems were a major factor in this increased productivity for some firms. "I've eliminated my whole office staff with a computer," said Philadelphia architect David Steele in the Architectural Record in March 1993. Many companies were also eliminating clerical help with the aid of new office technology as computers, answering machines, and cellular phones replaced receptionists in some offices.

In addition to increasing the productivity of their internal operations, many firms in 1993 were expanding their service offerings. Some companies were going into project management, using their design expertise to streamline the construction process and save money for contractors and owners. Other architecture firms were expanding into interior design, facilities management, and environmental planning and engineering to increase revenues. Conversely, some firms were reducing their offerings, choosing instead to specialize in tiny niche markets where they held a competitive edge. Niche growth areas in the commercial market for architectural services included designs for privatized prisons, arenas, hospitals and other health care facilities, long-term care facilities, warehouses, and recreational structures around river boat gambling casinos.

Entering new markets was another way that architecture firms were trying to maintain profitability. As design work for commercial construction continued to decline through 1993, public works projects were allowing many firms to increase revenues. For instance, while the amount of new hotel space plummeted 40 percent in just one year between 1991 and 1992, the value of new public works projects steadily increased from almost $91 billion in 1989 to over $102 billion by 1992. Water supply facilities and miscellaneous public buildings, which grew in 1991 and 1992 at a rate of 5 percent and 7 percent, respectively, offered the greatest potential for architecture firms competing for public works commissions. Design projects related to utility construction and conservation also offered increased opportunities.

After the recession of the early 1990s, the industry began to grow again, bringing in over $14.6 billion in 1994. Revenue was up 8.7 percent from 1993, and up by almost 20 percent from 1991, and industry strategists predicted the growth would continue well into the twenty-first century. According to the AIA, building activity increased an average of 1 percent each year from the levels of the first half of the 1990s.

Commercial development of suburban office space contributed to the life of the industry in the early 1990s, as commuters fled the cities and downtown office vacancy rates soared. Even when urban office vacancy rates stabilized by 1996, suburban office occupancy increased, and vacancy rates in the suburbs dropped by 9 percent annually as growing numbers of businesses abandoned their outmoded urban operations in favor of modern new quarters in the suburbs.

At the turn of the twenty-first century, conditions worsened for the commercial building industry as the economy weakened and businesses began to rein in spending. At the same time, businesses found it much more difficult to secure funding for expansion efforts. Large projects, including office towers, suffered most severely as a result of the return to conservative lending policies, which brought an end to what some observers called speculative lending.

Despite the slump in commercial construction in the early 2000s, the residential housing market, which accounted for approximately 15 percent of total billings, held strong. Interest rates neared historic lows in 2001 and 2002, fueling new home construction. New housing starts, the number of new single and multi-family homes under construction, rose from 1.58 million in 2000 to 1.6 million in 2001.

In order to encourage a continued source of work contracts, engineering and construction companies devised "one-stop shop" (design-and-build) services. Often, these firms offered architectural services at very low or negligible costs to help the company secure large construction and project management contracts. Gaining prominence at the turn of the twenty-first century, the design-build industry saw sales for the top 100 design-build companies grow 22.3 percent to $39.89 billion in 2000. Consequently, U.S. nonresidential construction market share for the top 100 design-build firms grew to 35 percent in 2000, compared to 25 percent in the mid-1990s. As stated in Engineering News Record, "The trend is clearly away from project-by-project management and toward management of larger construction programs for clients." The Design-Build Institute of America predicted that design-build companies would increase their share of the U.S. nonresidential construction market to 45 percent by 2005.

Social and Political Factors.
Until the late 1990s, one of the most stable areas of growth for the industry was retail construction sales, which increased a steady rate of 2.5 percent every year from 1980 to 1996. However, several factors were pushing that figure down. Home shopping through network clubs and the Internet was taking away the need for retail centers. In addition, as the baby-boomers aged, services became more of a concern than goods, lessening the need for retail centers even more. The effects of the Americans with Disabilities Act of 1990 offset some of the projected decline. Compliance with the act required that many newer buildings be made handicap-accessible, and this was expected to provide millions of dollars in architectural design contracts, along with rehabilitation and maintenance design work, especially for aging infrastructure.

Computerized Design.
Two important advances in the architectural services field in the early 1990s were computer-aided design (CAD) software programs and 3-D modeling. As late as 1993, architects in many offices were still designing with ink or pencil on vellum or Mylar surfaces. Designers sat at a drafting board and used triangles and compasses to produce precise technical drawings. With the introduction of CAD, however, an increasing number of professionals moved away from the drawing board and onto the computer to develop their designs. Although both methods were extremely labor intensive, CAD offered the advantages of allowing architects to save their work, to duplicate and move parts of a design, and to make changes more easily. Additionally, many tasks that were cumbersome on the drawing board were accomplished easily using CAD. Calculations of surface areas and volumes for earthwork projects were among the functions made easy by CAD software.

Critics of CAD argued that it was too costly for smaller firms to implement, that it stifled the design process and limited flexibility, and that it displaced architects. In contrast, others maintained that the implementation of CAD systems increased productivity for designers and reduced staffing requirements. For instance, J. F. Borelli, a New York architect, increased billings at his firm by 125 percent between 1990 and 1992 when he expanded his CAD implementation. He maintained his staffing level at 65 employees and discovered that clients increasingly requested that projects be developed with the CAD software.

Even more sophisticated than CAD software were 3-D modeling systems that allowed architects to design projects in three dimensions on computer. Three-dimensional modeling enabled architects to create virtual walk-through presentations of their projects, which allowed clients and builders to gain a better sense of the reality of a structure. Through the implementation of 3-D, clients and builders could conveniently view the successive stages of a project, or they could view structures from different angles. By 1993, several larger firms used 3-D modeling regularly. The technology remained expensive, but the subsequent savings in construction time and improved communications between designer and client often justified the implementation of 3-D software and accelerated the recovery of equipment costs.

Turn-of-the Century Design Trends.
As architects of the late twentieth century turned increasingly to new digital technologies for purposes of productivity, they experimented with 3-D technology to develop "e-topia" structures in modern communities, according to William J. Mitchell in the Architectural Record. In pursuit of e-topia, an expansion of the kiosk concept, designers undertook the design of virtual malls for online commerce, as well as virtual amusement parks and other conceptual structures that were previously limited to the physical realm. Through virtual reality technology, architects became further empowered in the arena of restorative construction. Modern designers ushered the art of structure restoration to a new level of evolution at the threshold of the twenty-first century by tapping the potential of 3-D systems and virtual reality to redefine the parameters of architectural restoration. Through the process of virtual reconstruction, historical structures became available for simulated viewing in their original state. Even ancient structures that ceased to exist altogether at some time in the past might be recreated in simulation form, through intensive application of the technique.

Increasingly, as the twentieth century drew to a close, what was old became new again, including the architectural theories of feng shui, which experienced a revival in the United States during the 1990s. Progressive architecture firms, encouraged in part by academics at the University of Buffalo, subscribed to the ethereal concepts of the ancient Chinese art, the substance of which involves strategic placement of space and energy. Proper implementation of feng shui begins prior to construction of a building, with the selection of a site. During the design phase, the orientation of the structure must allow for consideration of the forces of wind and water, as implied by feng shui. Despite the ancient mystic and religious connotations of feng shui, adherence to the practice resulted in building designs not unlike those of mid-twentieth century architects.

In stark contrast to feng shui, designer Gideon S. Golany discussed the use of geo-space (building underground) to squeeze more space for structures from cluttered landscapes in highly populated areas. Building groundward presented a number of advantages for better protection from the elements and lower energy consumption, according to Golany. The practice is most advantageous as a means of conservation, and despite the speculative nature of underground construction for human occupation, geo-space designers implemented designs in Montreal, Paris, and Japan by the end of the 1990s. Geo-space designs were particularly well-disposed to the growing trend among architectural designers to become involved in community development from the initial inception in order to create a customized and cohesive functionality of design, in coordination with existing regional demographics.

In 2003, the AIA reported that most of an architect's revenue was associated with new construction, at a ratio of 66 percent new construction to 34 percent renovation and rehabilitation projects. At that time, sole practitioners accounted for just under one-third of architectural firms. Approximately 66 percent of firms had between 2 and 29 employees, 2 percent of firms had between 50 and 99 employees, and 2 percent of firms had more than 100 employees. The largest firms collected almost half of all billings, while sole practitioners received only 2 percent of industry billings. By 2005, overall billings by architectural services establishments had increased 11 percent over 2002 levels, to reach $28.7 billion, a combined construction value of $360 billion.

In the early-2000s, the design of educational facilities brought in the greatest amount of revenue, at 24 percent. Office building accounted for 14 percent, health care facilities were 12 percent, retail and commercial space were 10 percent, multi-family residences were 7 percent, and single-family homes were 5 percent. By the late-2000s, health care had the highest percentage with 14 percent, followed by educational facilities with 19 percent, offices with 12 percent, and multi-family residences with 11 percent. Forecasts in 2007 expected the strongest growth to come from continued activity in the health care, hotel, and office facility industry segments.

The industry also reported changes in the makeup of architectural firms, with more women and minorities holding staff positions. In 2005, women accounted for 26 percent of staffing, compared to 20 percent in 1999. Racial and ethnic minorities held 16 percent of jobs, an improvement from 9 percent in 1999.

Current Conditions

According to data collected by the AIA, over the three year period of 2006-2008, U.S. architecture firms increased their gross billings by nearly $16 billion dollars (54 percent) to reach $44.3 billion in 2008--an average annual increase of 16 percent. The top five industry sectors in 2008 were health care, office space, K-12 education, college/university education, and food services retail. Rounding out the top ten were government and civic projects, hospitality industry, industrial, transportation, and recreational.

AIA's study revealed to two particular trends. First, architecture firms showed a significant increase in the number of "green" projects. In 2005, 31 percent of firms reported using green design practices; by 2008, 50 percent of firms were implementing sustainable design features. The largest increase was observed in firms with 10 to 49 employees, which jumped from 48 percent to 72 percent between 2005 and 2008. Second, over the same period, the percentage of firms using Building Information Modeling (BIM) software increased from 34 percent to 69 percent. BIM uses three-dimensional, dynamic building modeling software to create detailed building designs that can demonstrate the entire life cycle of that building.

Despite this strong revenue growth, architecture firms began to feel the effects of the economic recession late in 2008. Credit dried up, the residential housing market collapsed, and residential, commercial, and retail building ground to a near halt. In November 2008, the Architecture Billings Index (ABI), which is considered a reliable indicator of future construction activity, was at its lowest level (34.7) since it was first recorded in 1995. During 2009, conditions did not improve, and staff layoffs were widespread as firms moved to cut costs. In addition, small and mid-sized firms found themselves competing with much larger firms for jobs that these heavy hitters would normally pass by. Robert Cassidy wrote in Building Design & Construction in September 2009, "It's a sign of how desperate things are that national firms that normally work on hundred-million-dollar projects are themselves 'reduced' to fighting for the 'scraps' that in the past would have gone to small, local firms."

By late in 2009, the industry was looking at some signs of gradual recovery. In October 2009, the ABI index had rebounded to 46.1, the highest reading since the first signs of trouble in mid-2008. Inquiries for new builds in the institutional sector (e.g., schools, hospitals) showed the most growth. The commercial and industrial sectors remained flat in October, and the residential sector showed a continued, gradual upward trend.

Industry Leaders

According to the Architectural Record, the top three firms in 2008 based on revenues generated by architecture revenues were AECOM Technology Corp.; M. Arthur Gensler, Jr., and Associates; and HOK Associates, Inc. Los Angeles-based AECOM Technology is a global leader in design and engineering. Publicly traded, AECOM reported revenues of nearly $5.2 billion (17 percent from architecture services) in 2008 and employed 43,000. Among the few remaining pure design firms in the United States, M. Arthur Gensler, Jr., and Associates had revenues of $775 million (84 percent from architecture services) and employed 2,275. The San Francisco-based company, founded in 1966 by its namesake, remains privately owned. Also privately owned, HOK Associates, Inc., located in St. Louis, takes its name from its founders, St. Louis architects George Hellmuth, Gyo Obata, and George Kassabum, who created the company in 1955. The firm reported earnings of $752 million (78 percent from architecture services) in 2008.


Most architects complete a five-year accredited college program. They must then work for at least three years before becoming eligible for certification after a series of exams. The industry employed 270,500 in 2008. Most worked in architectural, engineering, and related services in firms with fewer than five employees. One in five were self-employed, a proportion that is three times greater than other professions. According to the Bureau of Labor Statistics, in 2008 mean annual salary for architects was $66,140.

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