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South Dakota

Architecture firms had time to prepare for downturn Before the 2008 economic downturn rocked the United States and caused economic quakes around the globe, some of South Dakota’s architectural firms sensed the impending collapse. Both Brad Ciavarella of Mitchell’s Ciavarella Design, Inc. and Richard Gustaf of Sioux Falls’ TSP say they experienced some drop in business prior to the official downturn in October 2008. efore October 2008 projects weren’t coming in quite as quickly and weren’t as numerous as they had been,” Ciavarella explains. “That gave us a little time to prepare and adopt an even more attentive and cautious approach to our work.” Gustaf says the first sign of a downturn resulted in his firm trimming staff numbers by 15 percent. A thorough review of expenses brought additional cutbacks and the company saw a need to transfer a larger percentage of the cost of employee benefits to employees. “We’re glad that we didn’t have to make the major changes we’ve seen in some firms across the nation,” Gustaf adds. “As a result of the changes we’ve become more sensitive to expenses and everyone has stepped up efficiency.” Among the symptoms of a pending slowdown was hesitancy on the part of clients to forge ahead with project plans. “We were shocked when several major clients put their projects on hold in 2008,” Richard Dempster at

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Architecture Incorporated in Sioux Falls, states. “They were all substantial projects and the clients had just determined that the timing wasn’t right. We managed to work through the reduction in our work without layoffs. We actually have benefited from the slow market by being able to hire some very talented college graduates and some staff that were dismissed from other architectural firms.” Longevity hasn’t necessarily been an asset to architects as they pursue projects. Gustaf says he doesn’t expect his firm to ever approach their business development as they did prior to 2008. “We’re an 80-year-old company,” Gustaf adds. “Just five years ago we made a point of including that information in our presentations. We’re finding that today’s clients aren’t so interested in what we did in the past or what

Ciavarella Design, Inc.(Mitchell) is one of many South Dakota architectural firms that have weathered the economic storm that started in 2008.

Table of Contents 2 Architecture & Engineering

Firms had time to prepare for downturn.

2 SDPB

July 2011

6 Community Incubator: Flexibility is crucial because start up businesses never know what it takes to get started.

8 South Dakota is a hub for new jobs The community of Aberdeen has good reason to be excited – a thousand good reasons, to be exact.


South Dakota

In 2010

Aberdeen was named one of the

100 Best Communities for Young People. www.americaspro mise.org

kind of success we’ve experienced, they want to know how well we understand their needs and want to see creative solutions for their needs before we’re ever awarded the project.” The architects aren’t finding that clients necessarily expect to see new, cost saving design or building materials in their project plans. They do want to understand their options for creating an energy-efficient, quality building that will serve their needs well into the future. “Architects have worked on energy-saving designs for years,” Ciavarella says. “Project managers are more likely now to follow up on some of our energy-saving recommendations. Geothermal heating systems are one element we’re seeing more often in our project designs.” All three architectural firms have seen the trend for including geothermal systems in building plans. While there is added cost for the system in constructing the project, the reduced cost of energy continues to pay back for the life of the structure. “Our clients clearly know the long term negative impact of cutting corners on a building project,” Gustaf says. “Clients are savvier than in the past, but they know that constructing a building needs to be done right. In some cases, a firm might delay upgrading a department in lieu of cheap materials or systems, thereby reducing the cost of their building project to some degree. There hasn’t been a history of projects with excessive or hard-to-justify space.

Watch Watch for th e for the signs. signs. And you’ll how And y ou’ll ssee ee h ow big ideas, passion and ideas, p assion a nd architecture architecture have have sshaped haped our do wntown c ommunit y. our downtown community. WhyA rc h i tec t u re M a t te r s .c o m WhyArchitectureMatters.com from phone. f ro m any a n y mobile m o b i l e ssmart mart p h o n e.

4 SDPB

July 2011

No one has asked us to cut corners on materials or systems. Our clients know the importance of using materials and systems that stand the test of time in the upper Midwest.” Other types of “Green” technology aren’t in great demand in building projects, primarily due to added costs. LEED certification isn’t wildly popular, in large part because of the paperwork required to file applications for the documentation. “Most of our projects qualify for Silver certification and are probably on the low end of Gold certification,” Dempster says. “Some government projects are certified, but it takes a lot of work to obtain that certification plaque by the door.” While some institutional and governmental agencies seek to control and reduce costs by minimizing architectural services, professional architects say those decisions could end up costing more in the long run. “Architects can provide good insight about how to use project funds wisely,” Ciavarella states. “We’ve certainly seen budgets be scrutinized more closely and funds become tighter. But this could be the best time to use an architect in order to get the most benefit out of your building project.” Dempster notes that some projects may benefit from the current slow-paced market. “Contractors are looking for work, so builders, either residential or commercial, are going to get some good prices right now,” Dempster says. Some larger architectural firms develop a niche such as education, health care or government structures. Gustaf adds that, while some of their approach to finding business has changed, the type of projects they’re seeking will remain the same. “We’re sticking to our knitting,” Gustaf states. “We specialize in healthcare, education and government buildings. We typically work with building committees or a body of people such as a board of directors. We know that type of project very well and we’re pushing ourselves to be more informed about trends in these industries that affect client needs. In pre-design meetings we’re gathering information about trends and using that information to provide the best possible building for our client.” Competition for jobs has increased since large firms in bigger cities have pushed out into more rural areas in search of work. Ciavarella says small firms have the advantage of lower overhead costs in that type of climate. “We just hired a new staff member,” Ciavarella says. “In terms of the kind of work we’re doing, we’ve been awarded more government projects than we’ve seen in the past. That may be due to stimulus funds that were distributed. I’m not sure.” Dempster notes that South Dakota’s architects may have to wait to see a stronger rebound in business but the future has a positive outlook. “We’re not back to normal with the humming business we saw several years ago,” Dempster adds. “But there is a pent up demand for building out there right now. People aren’t quite comfortable enough to move ahead with their plans yet, but when it does happen architects and contractors in South Dakota are going to be busy.” SDPB Loretta Sorensen, Owner, Prairie Hearth Publishing, LLC. sorensenlms@gmail.com.


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South Dakota 2010: $39.893 billion

+4.28

Community incubators have different needs

percent

2009: $38.255 billion

-0.1 percent 2008: $38.293 billion

+ 9.15 percent

Flexibility is crucial in an incubator setting, because a start up business never knows what it might need to get started. And that may also be the biggest challenge for South Dakota

2007: $35.082 billion

communities that work with prospective companies.

+ 8.11 percent 2006: $32.451 billion

+ 2.56 percent 2005: $31.641 billion

+ 3.44 percent 2004: $30.588 billion

+ 5.88 percent 2003: $28.889 billion

+ 4.76 percent 2002: $27.576 billion

+ 9.53 percent 2001: $25.177 billion

South Dakota Gross State Product: (in current $) 6 SDPB

July 2011

o two companies have exactly the same needs,” states Rich Naser, Executive Director, South Dakota Technology Business Center in Sioux Falls, SD. “The Technology Business Center addresses this by assessing each client’s stage of development and then providing tailored services based on that assessment.” In Aberdeen, SD, Director of Operations for the Aberdeen Development Corporation, Chris Haar feels his community is a bit more flexible than others who also have incubators. “Our concept is whatever makes sense in the situation,” he explains. “We don’t restrict ourselves in what we can and cannot do in this space. We really try to manage it in the realm of what our mission is and that is primary job creation.” Out in western South Dakota, Barbara Zwetzig, Director for the Center for Business, Entrepreneurship & Tourism on the Black Hills State University campus in Spearfish, SD, says one reason that business incubators are attractive as a strategy for growing a local economy is that the people in the Black Hills want to live and work here, and so they want to build their business here. “If we create the supportive environment to help our entrepreneurs succeed, they will want to start and stay here,” Zwetzig explains. “A high percentage of incubated businesses stay where they started.” Each incubator tailors its own support system to meet the community needs. For example, Vermillion, SD, has set up physical and problematic resources for a transitional college community. “People come in and go to school and they leave,” explains Steve Howe, Executive Director of the Vermillion Area Chamber of Commerce & Development Company. “We want to make sure they know there are resources here.” So what has happened in Vermillion is that the Beacom School of Business on the University of South Dakota campus has partnered with the local Chamber, Development Corporation, and Small Business Development Center to provide space on and off campus to get students and other hopeful entrepreneurs involved in a business to stay in the community. Other communities are developing partnerships and

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buildings for the same reasons. Aberdeen has increased the size of the SMART Connection Center from 5,400 square feet to 9,000 square feet and has brought people into the building with similar missions, as well as setting up a spot for companies that include video and Internet conferencing. Haar says a start up or even current company can walk in, plug in, and literally get going overnight. The same thing is true in the 45,000-square-foot business incubator in Sioux Falls. The Center provides business development assistance and facility-related services to early-stage and high-growth ventures in the Sioux Falls area. Since 2009, BHSU’s Center for Business, Entrepreneurship & Tourism has spearheaded the project to create a business incubator, to be named the Northern Black Hills Business Incubator. It will be the second incubator in western North Dakota, complementary to the high tech focus of the Black Hills Development Center near the South Dakota School of Mines and Technology campus in Rapid City. Many agree that an incubator setting is working. Naser states that the process works because incubators provide the resources and support that new ventures need to succeed. “By leveraging incubators, entrepreneurs can focus on the important aspects of growing their business instead of spending time on issues such as space, IT, infrastructure, and phone systems,” he says. “Incubator staff, partner organizations, and mentors provide entrepreneur guidance, expertise, and access to resources they need to succeed.” Zwetzig points out that another term for business incubators is ‘accelerator.’ “The process of providing assistance to start ups helps to accelerate them through the rough patches and helps them to survive,” she says. “There is no reason to suffer along through lessons that many have already learned. If businesses have mentors and coaches to help them avoid the preventable pitfalls of starting a business, they should take advantage of that.”

SDPB Alan Van Ormer - avanormer@prairiebizmag.com


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South Dakota

South Dakota is a hub for new jobs The community of Aberdeen has good reason to be excited – a thousand good reasons, to be exact.

Unemployment

RATES National

9.0%

April 2011 seasonally adjusted Statewide

4.9%

April 2011 seasonally adjusted Rapid City MSA

5.0%

April 2011 not seasonally adjusted

Sioux Falls MSA

4.7%

April 2011 not seasonally adjusted Source: Labor Market Information Center, South Dakota Department of Labor and Regulation and Bureau of Labor Statistics, U.S. Department of Labor

8 SDPB

July 2011

his northeastern South Dakota city of 26,000 people will be home to 1,000 new jobs this year. And these are not hypothetical jobs, but actual positions across a wide array of skill sets and industries. “We’re terribly excited,” says Julie Johnson, Executive Director of Absolutely! Aberdeen. “This is a product of a lot of years and a lot of hard work by the community.” Johnson explains that community leaders started a growth initiative about 10 years ago with an attitude of “we’re going to grow this place.” She says they put horsepower behind the plan and have been working together on it every day since. That groundwork is paying off as an estimated 1,031 new jobs will be available in Aberdeen this calendar year, and nearly the same number in 2012. Representatives of some of the companies hiring spoke at a press conference in April to discuss their expansion plans, including 3M, Avera St. Lukes, Hub City Inc., Molded Fiber Glass Companies, Midstates Inc., Northern Beef Packers, Sanford Health, Twin City Fan and Wyndham Hotel Group. The impressive job growth in Aberdeen is indicative of the positive overall stature of the South Dakota economy. According to Dawn Dovre, Public Affairs Director for the state’s Department of Labor and Regulation, South Dakota’s unemployment rate has remained one of the lowest in the nation. Along with Nebraska, the Dakotas have consistently had the lowest unemployment throughout the recession, around half or less than half of the national rate of 9.0 percent. South Dakota’s unemployment rate has remained consistent the past 18 months. “To us, the stability in that unemployment rate is a good indicator,” Dovre explains. Dovre says the number of job openings statewide has increased noticeably over the past few months. Today there are 8,400 openings, up from 7,700 in 2009-2010. “Employers are hiring again, and they’re in need of quality workers,” she states. Aberdeen’s job growth means workforce recruitment is a very high priority. Johnson encourages locals to spread the word about these career opportunities, “selling” Aberdeen and its quality of life to friends, relatives, and alumni. “We also understand that most of

T

the potential workers are probably visitors first,” she adds, so promoting tourism is another important component. In addition to people spreading the good word about local opportunities, two initiatives at the state level are helping to match talent to businesses across the state. Dakota Roots was launched in 2006 to recruit people to – or in many cases, back to – South Dakota. Individuals who sign up for the program are matched with a representative who helps identify relevant job opportunities. Dovre says Dakota Roots has more than 2,500 active job-seekers, the average age being 36. The program has brought 1,800 people to the state. Dakota Seeds makes grants available to South Dakota businesses to help fund internships and assistantships, providing companies with a pipeline of well-qualified employees and students with solid experience in-state. The Governor’s Office of Economic Development reports that, after graduation, 35 percent of participants return for full-time employment at the same company. Thirty South Dakota companies were recently awarded grants through Dakota Seeds, creating 80 internships. Six of the companies are in Rapid City, and officials there are encouraged by how many are taking advantage of what the program can offer. “Dakota Seeds serves a really good purpose in keeping graduates in the state,” says Fred Dieken, Assistant Manager at the Rapid City office of the Department of Labor. “It lets them know there are techrelated openings, career fields they can pursue here.” Rapid City is experiencing some job growth as well, and Dieken identifies the retail and hospitality industries as leading segments. “Retail has really exploded in the last few years,” Dieken says. Activity is strong around the city’s shopping centers, and he says at least four major hotels have opened in the last year. In addition, call centers are expanding in the city, and several have moved operations to Rapid City from other states. West River and East, South Dakota’s job sector is showing strong signs of growth. SDPB Kristin Brekke Vandersnick is a Willow Lake, SD-based freelance writer. She can be reached at brekkefarm@gmail.com.

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