As China’s mainland real estate market continues to decline, the architectural design industry is entering a winter chill with salary cuts and layoffs spreading throughout the sector. Employees at architectural design institutes in first and second-tier cities are feeling anxious.
The official account of the Jizhe Studio reported on November 11th that the signals of decline reached a design institute in a second-tier city where people who had been “cocooned” were slow to react. It wasn’t until the boss announced salary cuts and business structure adjustments that everyone realized that the winter had truly arrived.
In the planning department where Lu Jing works, which is a core department and part of the boss’s “core” team, they too are facing downsizing. Amidst the chaos, Lu Jing understands that she is in an awkward position in the workplace: she is pregnant and about to go on maternity leave.
With the company in turmoil, colleagues around her are receiving notices of job transfers. If they refuse, they are treated as being “on standby” and only receive the minimum wage, putting indirect pressure on them. Lu Jing said, “If you feel it’s meaningless, you have to find a way out on your own.”
Lu Jing joined the design institute that mainly serves real estate companies in 2018 when the industry was in its final expansion phase, with design projects for new properties overflowing. However, as the real estate market returned to rationality, their revenue also plummeted.
Lu Jing was originally responsible for designing homestays, but the number of projects decreased significantly after the epidemic. Since 2022, her salary has almost been cut in half, and year-end bonuses were also canceled. This year’s market is even worse than last year. The overall number of planning projects has decreased, and internal competition and vicious competition have become the rules of survival. Salary cuts and layoffs are no longer surprising news.
Following the end of her maternity leave, Lu Jing’s “good luck” also ended. Shortly after returning to work at the beginning of this year, she was quickly informed by her superiors about a job transfer talk, being asked to be transferred to a newly opened department to manage media operations. She had a big argument with her supervisor and ultimately had to compromise.
Lu Jing mentioned that her husband works in the environmental engineering industry, and his income cannot support the entire family’s expenses. She cannot afford to lose her current job temporarily.
Some local governments are facing financial difficulties, leading to longer payment cycles. “The land is also a bit unsellable,” said Chen Man, who works in a design institute in a first-tier city. When reflected in project contracts, the amounts are decreasing. Even professionals like her, who have been working in planning and architectural design for over a decade, are starting to feel anxious.
Chen Man studied in the United States in 2008 and returned to China after graduation to work for a leading state-owned enterprise planning and design institute, where she has been until today.
In her memory, from 2014 to 2018, there were never-ending urban planning projects. But now, the entire industry has returned to disorder. Most design institutes and firms need to compete more fiercely to get a share of the remaining market.
Internal competition has become an almost explicit survival rule. Chen Man remembers that the fee standards in the urban planning and design industry in her city have not been updated for 20 years. To secure projects now, bids need to be reduced by 30% or even 35% from the base price. “If you don’t lower your prices, there are more people willing to do it for less.”
Some design institutes require employees to solve their own salary, social security, and housing provident fund issues and seek their own paths. A designer in Hainan said they have not received their salary for 6 months; a public building designer who has been working in a state-owned enterprise for many years resigned and started finding projects on his own. After a week of contact, he was surprised to find that almost none of the projects in the market guaranteed payment for the construction.
A designer in Fujian didn’t wait for news of layoffs but instead received news of a salary reduction for all employees. Her monthly salary dropped to 4800 yuan. After downsizing her expenses, even buying toys for her child became a budget concern, only buying them on birthdays.
In fact, as early as in 2013 or even earlier, scholars predicted that cities would enter a “stock era,” with difficulties in sustaining land finances. Wang Xiaolu, former deputy director of the National Economic Research Institute of the China Reform Foundation, once stated that when land revenue becomes a significant income source for local governments, it would bring many problems, and spending decades of land usage profits at once is unsustainable.
A study by the China Urban Planning Society verified this change with data: from 1996 to 2011, Chinese urbanization rates grew rapidly for 16 consecutive years, increasing from 30.48% to 51.27%. After 2011, the growth rate slowed down, and in the recent three years, urbanization rates have not increased by more than 1 percentage point.