During the 1980s the business of preservation boomed. What percentage of America`s Gross National Product (GNP) flows from historic preservation activity? Although no precise statistics are available, historic preservation goods and services now may account for as much as $40 billion, or close to 1 percent of the entire GNP--quite a leap considering that at a National Trust symposium in 1979, entitled "Preservation: Toward an Ethic in the 1980s," that question was not even considered. The discussions of economics and preservation focused solely on real estate development and federal tax policy.
The seeds for the revolution in the business of preservation were planted in the 1970s, as fascination with heritage began to grow in reaction to the 1950s and 1960s "new is better" orientation. The celebrations of the U.S. bicentennial had widespread influence; the changing attitudes were epitomized in the immensely popular TV series "Roots," which was viewed by more than one-third of America`s households when it first aired in 1977. In the 1980s this emotional attachment to the past fueled the back-to-the-city movement; young professionals particularly became urban pioneers by buying and renovating older structures in what were considered the "bad" parts of town.
Consequently, in the 1980s historic preservation activity--preserving historic structures and geographic areas as well as educating the public to garner favorable public policy and financial support--became widely dispersed through our economy.
Retrieving facts and figures to document trends is difficult. Industry-wide figures are cited where available; case specific data supplements the paucity of aggregate data. This examination of the business of preservation--as it influences construction, economic development, merchandising and tourism--can help lay the groundwork for maintaining and generating preservation activities in the 1990s. [See special notes on page 18.]
CONSTRUCTION. The construction industry changed dramatically in the past decade. Ten years ago the dollar value of commercial rehabilitation projects was about three-fourths that of new construction. Today commercial rehabilitation expenditures amount to more than 150 percent of new construction costs. Expenditures on residential renovations more than doubled between 1980 and 1987. In 1989 the dollar amount of commercial and residential renovation and rehabilitation projects was estimated at $200 billion.
Data from two sources--the Bureau of the Census and the National Park Service (NPS)--can help determine what percentage of these construction expenditures relates to historic buildings. Based on NPS estimates, there are about 3 million structures in the U.S. listed either in state inventories or on the National Register of Historic Places. These inventoried buildings include approximately 12 percent of the nation`s buildings over 50 years of age. Although it is difficult to project economic scale, it seems reasonable to estimate that $10 billion to $20 billion annually is spent on the renovation and preservation of historic buildings.
A 1989 survey by the National Association of Homebuilders` Remodelers Council found that 62.7 percent of those surveyed had remodeled or renovated pre-1940 residential and/or commercial properties in the past 30 months. More than half indicated that residential rehabilitation or restoration is an important part of their construction operations.
PRODUCT MANUFACTURERS. The impact of increased renovation activity on product manufacturers has been dramatic. Although the real estate industry is experiencing a general slowdown in new construction, renovation is expected to remain healthy and even expand in the 1990s.
When the Old House Journal began publishing in the mid-`70s its catalog of companies manufacturing products geared toward renovation of older and historic homes, there were 205 listings; the current catalog lists over 1,500 products and services. Clem Labine, the former publisher of the Old House Journal, recently began publishing Traditional Building, a publication for contractors, architects and interior designers active in historic construction or "historicizing" new construction. "Historic preservation has created an appetite for historical design," Labine believes, be it new or old.
Expansion stories among window, paint, metalwork, wood moulding, masonry patching and cleaning, lighting, textile and dozens of other product manufacturers are legion. Most are small businesses, first fueled during the boom days of federal rehabilitation tax incentives. These companies still find market demand increasing for their products despite the drop-off in certified rehabilitation activity.
To cite just a few success stories:
- The Stulb Co. in Norristown, Penn., has set out to increase substantially the sales volume of paints geared to restoration and preservation markets. Currently about 50 percent of the company`s $6 million annual gross can be attributed to the preservation market, a figure that has nearly tripled over the past five years.
- The sales of Ball & Ball, a manufacturer of reproduction lighting fixtures and hardware in Exton, Pa., have increased 50 percent over the past decade.
- W.F. Norman Corporation, Nevada, Mo., producer of pressed metal ceiling systems and decorative sheet metal ornaments, reports that 70 percent of its products relate to the preservation market. A decade ago the company was not even servicing this market.
- Scott Howell of Robinson Iron Co. in Alexander City, Ala., reports that more than 40 percent of the company`s output is for the preservation market--approximately $1.25 million in annual sales, a five-fold increase over sales 10 years ago. He predicts continuing increases in sales in the 1990s, focusing on restoration of iron-front buildings and civic monuments in iron.
In this rosy climate, however, there are words of caution. NPS reports that construction expenditures for approved certified rehabilitations for FY89 were projected at $769 million, a decline of 11 percent from FY88 but an alarming reduction of more than two-thirds from the peak year of FY85.
NPS`s Chuck Fisher is concerned that larger companies previously willing to invest in research and development of new products that better conform to historic preservation standards are cutting back on R&D activity. Whitman Ball of Ball & Ball predicts that larger developers now will "try to do projects for less money while skirting NPS quality requirements. On the brighter side, Ball believes that in increasing numbers individuals will continue to pursue high quality preservation projects.
ARCHITECTURE AND INTERIOR DESIGN. Trends indicate that the proportion of commissioned rehabilitation work by architectural and interior design firms appears to be lagging behind that of construction companies. Of the American Institute of Architects` 15,000 member-owned firms, slightly more than 20 percent of their gross revenues in 1986--or nearly $1.5 billion--were attributable to rehabilitation projects. Over the next decade that share will grow: of 14 trends identified in AIA`s Vision 2000 project that will affect architects during the `90s, the second in importance (behind the increased use of computer-aided design and engineering is the increasing number of renovation and rehabilitation projects.
For interior designers, preservation only recently has been identified as a design specialty; of the American Society of Interior Designers` 19,000 professional members, at least 2,500 are engaged in historic renovation projects.
ECONOMIC DEVELOPMENT. Since its inception in 1976, the federal tax incentive program has generated nearly $14 billion in construction on close to 21,000 buildings. The National Trust`s Main Street program has generated commercial revitalization in 548 communities in 31 states since 1981. Eighty percent of these local efforts are still active. Some 10,000 buildings have been rehabilitated with a reinvestment exceeding $1 billion. There are probably an equal number of additional programs based on the Main Street revitalization model.
The economic benefits stemming from local historic preservation activities have been dramatic. In its 10 years in St. Paul`s Lowertown neighborhood, Lowertown Redevelopment Corporation has tracked $375 million in investment, compared to $22 million the decade before. Property taxes generated over the period increased nearly five times! Weiming Lu, executive director of the corporation, believes that because of the catalytic effect, all of this activity--whether new construction or renovation--can be "attributed to preservation`s influence."
MERCHANDISING. A major growth market in the 1980s has been architectural artifacts. Dan Kastle of the Great American Salvage Co. in New York City estimates that the 25 or so architectural salvage companies probably account for $100 million annually in sales.
This line of business is a sensitive issue for preservationists, however. There have been frequent reports of vandalism of astonishing gall.
No precise data could be found to substantiate changes in retail sales. A spot check, however, shows growth. Bill Fullen, owner of three retail stores on the Strand in Galveston, Tex., states that although sales at the Old Strand Emporium have remained constant for the past 10 years, 20 competing businesses opened successfully during that time. Roy Williams of Williams, Jackson, Ewing, leasing agents for the restored Union Station in Washington, D.C., maintains "the architecture is a very big draw to the general public and is also a positive factor in retailer interest."
Motivated by the need to boost revenues that have declined from other sources, nonprofit preservation organizations have entered the merchandising arena in a big way. The Museum Store Association has more than doubled its membership during the last 10 years to 1182, with 790 associate members who are product vendors. Of these, approximately 15 percent are historic houses and sites and 23 percent are history museums.
Volume increases in the past 10 years are astounding: Winterthur`s retail store sales increased from $250,000 to $2.3 million and direct mail sales increased from $342,000 to $10 million. The Smithsonian`s museum shop sales increased from $7.7 million to $28.8 million. Its mail order sales increased from $4.7 million to $23.8 million.
Currently Congress is questioning whether nonprofit organizations should be taxed for shop and mail order-income. Museum shop directors point to the close relation of these sales to the mission of their organization. The Smithsonian`s business manager Joe Chmelik says that its stores "are an extension of the museum itself."
Licensing the right to reproduce historic furniture and furnishings is a major source of income for a half dozen organizations, including Colonial Williamsburg, Historic Charleston Foundation, Winterthur, Historic Natchez Foundation, the Smithsonian and the National Trust. Michael Burke, a New York Citybased consultant, estimates that retail sales for these programs stand between $50 million and $100 million annually.
PUBLISHING. The primary focus of historic preservation activity in publishing is through periodicals. An explosion of articles on preservation subjects in a wide variety of magazines--Southern Living, Gourmet, Smithsonian and others--has been a primary force in fueling popular interest in heritage and preservation. Overall, subscription readership has grown for publications focusing directly on preservation: The Old House Journal now has 140,000 subscribers; The National Trust`s Historic Preservation has doubled its circulation over the past decade. Preservation books remain a negligible part of the nation`s publishing output, even though the National Trust reported that sales doubled from 1988 to 1989 and the MIT Press that 1988 sales of architectural titles were 60 percent greater than 1984 sales.
TOURISM. The U.S. Travel Data Center reports that tourism accounts for 6 percent of the GNP (compared to real estate`s 13 percent)--or $323 billion in 1989. Although visits to historic sites are documented as prime reasons for touring, no data is available to reliably determine the amount of tourism related to preservation. The most ambitious study of American travel preferences, conducted by Tourism Canada, concluded that the market in the U.S. for cultural tourism is 20 million persons over the age of 16 (or 11 percent of the population!. Eleven percent of the $323 billion expenditures associated with tourism would amount to $35.5 billion. If one assumes that half of these expenditures--whether for hotels or meals, admission to historic sites or retail sales--directly related to historic preservation interest, the economic impact would amount to $17.8 billion.
The United States Travel and Tourism Administration maintains data on international travel to this country. In 1988 international visitors spent $37.1 billion in U.S. travels, an increase of 25 percent over the previous year. A strong connection between those trips and historic preservation exists (as charted in Figures 1 and 2).
Historic preservation has had a substantial impact on lodging. Hoteliers were early users of the federal tax incentives; during the first 10 years of the tax incentives, 3 percent of the certified projects were hotels, including such premier projects as the Willard Hotel in Washington, D.C., Timberline Lodge in Oregon and the Jefferson Sheraton in Richmond, Va.
Bed and breakfast establishments have proliferated during the 1980s at an amazing pace. "There has been a virtual social revolution" in people`s travel patterns, maintains Judith Reynolds, an appraiser of historic properties. The American Bed and Breakfast Association estimates there are over 15,000 BBs in the U.S. and Canada and that over 70 percent are housed in buildings 50 years of age or older. In 1978 only four guidebooks for B&Bs were available; there are now over 100 guidebooks and two magazines. In addition, the Guide to American Historic Inns lists 4,900 inns, all constructed before 1939. According to one study published in 1988, average revenues for B&Bs amount to $170,000 annually.
Some communities have done an impressive job of generating revenues primarily on the basis of heritage interests. Williamsburg, the leader in this category, had a 1988 operating revenue of $111.9 million and 1.2 million visitors. On a smaller scale the Galveston Historical Foundation`s "Dickens on the Strand" two-day festival in 1988 brought 140,000 visitors to the community and accounted for $10 million in expenditures.
Historic preservationists traditionally have focused on a relatively narrow range of real estate activity in their attempts to quantify economic impacts of preservation. During the past decade, however, businesses have proliferated and expanded to fill the market demand created by preservation`s popular success. The 1980s was a time of immense growth for these for-profit and nonprofit businesses.
Quests to quantify this activity result mostly in informed estimates. Whether or not the output of goods and services reached $40 billion as estimated, it is clear that this activity has grown exponentially in the 1980s and is far larger than most realize.
Preservation is less a single discipline now than ever. It is a small, yet important, piece of many, many pies. Its business profile is mainly made up of small, often family-run operations, whose owners may not know their output is a part of a national movement to preserve America`s historic structure, sites and communities. They are merely responding to perceived market demand.
So much has changed in the 1980s regarding the business of preservation, yet we must still heed John Kenneth Galbraith`s warning of a decade ago:
Preservationists must never be beguiled by the notion that we can rely on natural economic forces or that we can rely on the market ...the market works on a short-time dimension and the people who respond to the market are different from those who ultimately gain from conservation or preservation.
--Preservation: Toward an Ethic in the 1980s.
Surprisingly, the reduction in construction activity occasioned by the 1986 federal rehabilitation tax credit changes has not slowed the dramatic expansion of economic activity stimulated in part by their institution in 1981. Nevertheless, economic subsidies and incentives will remain essential to help direct market forces toward preservation solutions, if we hope to see the tremendous preservation gains engendered through diverse economic activities of the 1980s sustained and increased in the 1990s.
As we enter the 1990s, the greatest challenge to preservationists is to harness the economic forces unleashed by preservation`s success: to increase membership in preservation organizations; to facilitate continued and expanded product development, design and construction sensitive to preservation goals; and to make knowledge of the nation`s heritage even more accessible and enjoyable to millions of Americans. Keeping in mind Galbraith`s warnings, preservationists need to take the long-range view in setting goals, but accomplishing these goals will depend largely on how successfully we are able to play into and influence short-range market forces.
Please note: Comparative data cited here are generally not adjusted for inflation and should be read as such. Sources for construction figures cited in this article include:
- Renovation: The Market You Can Count On, Sweet`s Group, McGraw-Hill Information Services, 1989;
- Expenditures for Nonresidential Improvements and Upkeep: 1986, U.S. Department of Commerce, Bureau of the Census, U.S. Government Printing Office, Washington, D.C., 1989;
- Expenditures for Residential Upkeep and Improvement: First Quarter 1989, U.S. Department of Commerce, Bureau of the Census, U.S. Government Printing Office, Washington, D. C., 1989.
Publication Date: Winter 1989-1990