Architectural slump could portend slowdown

Economists concerned the United States economy is overdue to lose momentum may have a new data point in their favor with the release of the September American Institute of Architects (AIA)/Deltek Architecture Billings Index (ABI).

The index, designed to indicate growth in billings at a rate of 50.0 or higher, produced a score of 44.8 in September, which the Washington-based AIA says is “is the lowest score reported since December 2020 during the height of the pandemic.”

“Business conditions at architecture firms deteriorated in September,” states the AIA, which surveys architects in cooperation with Virginia-based information services firm Deltek and collates results to formulate the monthly index and several related indices.

The ABI score of 44.8 for the month “indicates that the share of firms reporting declining billings has significantly increased,” adds the AIA. “In addition, the value of newly-signed design contracts also slumped in September, indicating that there is increasing reluctance among clients to sign contracts committing to new projects,” adds the association.

The AIA and Deltek say architectural firms continue to report “relatively robust” backlogs of 6.5 months on average, although that time fame has shrunk by nearly a month since a peak of 7.2 months, on average, in March 2022.

The September survey indicated billings declined at a slower pace at firms located in the Midwest, which has hosted a more active through much of this year.

By firm specialization, billings were essentially flat at firms with an institutional specialization, while they declined further compared with August at firms with a commercial/industrial  specialization and “remained very soft” at firms with a multifamily residential specialization, says the AIA. In the multifamily sector, billings have declined every month since August 2022, says the association.

One survey respondent calls conditions “good through the end of the year and the first quarter of next year,” thanks to the firm’s current backlog. “We are expecting a slowdown in the first or second quarter of 2024,” adds the representative of that firm, which employs 30 people in the Western U.S.

Comments a survey respondent in the Northeast, “Owners want to build, but inflation is wreaking havoc with financial pro formas and [is] forcing cost-cutting measures on many commercial projects so that they can proceed.”

The AIA and Deltek also writes that while overall national nonfarm payroll employment increased by 336,000 new positions in September, architectural services employment fell by 1,900 positions from July to August, “offsetting most of the employment gains seen so far this year.”