ARCHITECT’S HOURLY RATES AND HOW THEY CAME TO BE
So why do architects charge the rates they do? That’s mainly a function of Overhead (and very little profit). However, before we delve deeply into this, compare the architect’s hourly rates ($100 to $150 to $250) with those of Lawyers. Attorneys may charge around $300 to $400/hour. Most architects are less than half that; in some cases about 1/3 of that.
Architects are in college and graduate school every bit as long, if not longer, than Attorneys and Doctors. They deserve professional compensation. They work longer hours, helping their clients.
It is quite common for the overhead & profit rate for an architectural firm to be a multiple of 2.3 to 3.2, with around 2.8 being the approximate average. But this can be higher for metro areas.
If you are thinking that architects have a high profit margin, this is typically not the case. Most firms have only around a 6% profitability and this can drop in lean times. Very few architects are getting rich. Being an architect is a calling, like a sacred duty to most architects. They are about 75% technician and 25% artist. They eat, sleep and breathe architecture, trying to be the best that they can. They generally enjoy what they do and they want clients to be happy and delighted with what they create for them.
So: let’s look at the architect’s multiple, going backward:
Let’s examine the $150/hour rate, which is quite common.
$150/2.8 = $53.57. That’s often at the upper end for many small firms.
$53.57 x 2080 (number of salaried hours)= $111, 428/year.
That’s not a bad income in North America these days for a professional person, but certainly not in the upper category. Most architect’s clients earn much more than they do per year. And when the market drops and no business comes to the architect, he doesn’t get a paycheck. So, that “salary” is largely imaginary for many companies, particularly in challenging economies.
Therefore, out of every $150 the architect’s company earns, $96.43 is going to run the office and pay for everything necessary to maintain their ability to be available to their clients, whether clients decide to hire them to design a project or not. What things do architects have to pay for to maintain their availability? Electricity, maintenance on the building/office space, taxes, employee benefits (usually half of social security and medicare and freebies like 401k contributions and health insurance, which has become very expensive), marketing costs, computer replacement, new software, bookkeeping, accounting, legal fees, insurance of all types and more.
So, when viewed in this context, the architect’s average fee rate is a bargain.