Architectural firms saw a decline in their business in October
The Architectural Billing Index (ABI) reading from the American Institute of Architects (AIA) and Deltek showed a decline for the fifth straight month in October.
The index fell to 44.3 in October, down 0.5 points from 44.8 in September – marking the lowest score since December 2020.
The ABI is a leading economic indicator of non-residential construction activity with a lead time of 9 to 12 months. Any score above 50 indicates an increase in billing. A score below 50 indicates a decline. The score was below 50 for six of the 10 months in 2023.
“Not only does this report indicate lower billings at businesses, it also indicates a decline in the number of clients exploring and committing to new projects, which could impact future billings,” Kermit Baker, chief economist at AIA, said in a statement. “Soft conditions were evident across the country as well as in all major non-residential construction sectors.”
Newly signed design contracts reached 46.5 points in October, little changed from 46.2 points in September.
The AIA also reported that companies have shed 2,600 jobs since the beginning of the year. But employment in the industry is still higher than it was at the beginning of the year.
Bills fell across the country in October. Businesses in the North East and West recorded the lowest number of invoices for the second month in a row.
Total billings at institutional specialty architecture firms stabilized at 49.1 in October, down from 50.0 in September. Firms specializing in multifamily residential fell to 40.1 from 43.5, while firms with a commercial/industrial specialization fell to 43.7 from 45. Mixed specialty firms fell to 44 from 46.2.
The AIA also reported that companies have shed 2,600 jobs since the beginning of the year. But employment in the industry is still higher than it was at the beginning of the year.
a future vision
AIA and Deltek asked business leaders about current and future revenue and expense trends.
“Overall, responding company leaders indicated they expect net revenues to be essentially flat at their companies this year, growing at just 0.5%, with slightly more companies anticipating an increase in their revenues from 2022 (44%) than expected.” AIA said down (37%).
The group said that large companies are more likely to see an increase in revenue this year than small companies.
“The urban mixed-use market segment continues to stagnate, while our convention center and education market segments are very active,” commented one mid-sized company in the West.
A small company in the South indicated that it was working through some backlog of projects but expects a slowdown in 2024.
“There is a high volume of awarded projects that are pending, especially in the commercial market. There is also a high volume of proposals submitted with award decisions pending,” the Midwest firm with an institutional specialty said.
An interactive score of the AIA Architecture Billings Index is available on the SMU website.
