July 2023 ABI Report: Architecture Firm Billings Hold Steady

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Architecture Firm Billings Hold Steady in July

In the world of architecture, the July 2023 AIA/Deltek Architecture Billings Index (ABI) has revealed a state of equilibrium, with a score of 50.0 for the month. This score signifies that the number of firms reporting a decline in billings is proportionate to those reporting an increase. While inquiries into new projects continue to grow, albeit at a slightly reduced pace compared to the previous months, the value of newly signed design contracts remained stagnant. Fewer clients committed to projects in July than in the preceding two months.

Regional Variances

Interestingly, while national billings remained unchanged, firms situated in the Midwest enjoyed their ninth consecutive month of growth, emphasizing the region’s resilience. In contrast, firms in other parts of the country reported modest declines, notably in the South, which had previously seen three months of growth. Business conditions also improved for firms specializing in both commercial/industrial and institutional projects in July. Commercial/industrial firms recorded their most robust billings in over a year. On the flip side, firms with a multifamily residential specialization continued to experience subdued billings, marking a year since their last growth report.

Architecture Employment Growth

On the broader economic front, July maintained a generally positive outlook. The Consumer Confidence Index reached a two-year high, driven by consumer perceptions of more job opportunities and lower inflation. Nonfarm payroll employment increased by 187,000 new positions, with construction employment showing steady growth, adding 19,000 jobs. In the architectural services sector, employment continued to rise, with an additional 1,100 positions added in June. Thus far in the year, the industry has witnessed an impressive increase of 3,600 positions.

Staffing Challenges

Despite the positive employment trends, staffing remains a challenge in many architecture firms. Over half of firm leaders (53%) believe their architecture staff levels are appropriate, while 40% indicate they are understaffed, and only 7% report being overstaffed. Larger firms, in particular, are more likely to consider themselves understaffed (45%). In the South, where billings have been robust, a higher percentage of firms perceive themselves as understaffed (48%). Conversely, firms specializing in multifamily residential projects, where conditions have been softer, are more likely to consider themselves overstaffed (10%) or appropriately staffed (61%).

Responding firms are slightly larger than the average architecture firm, with an average of 25 full-time equivalent (FTE) architecture positions. Firms in the Midwest and those with an institutional specialization reported the highest average numbers of FTE architecture positions. For firms feeling understaffed, the average gap is around 4 FTE architecture positions, while larger firms report an average gap of 7 FTE positions. Conversely, firms that feel overstaffed report an average excess of 4 FTE architecture positions.

Insights from Industry Leaders

Here’s what some of our Work-on-the-Boards participants had to say:

  • “We are seeing softer inquiries/proposals sent in recent months, but still have a strong backlog and pipeline.” — 200-person firm in the West, commercial/industrial specialization.
  • “The public sector has slowed down significantly. Hoping it is just the summer slowdown and things start to pick back up in the fall.” — 6-person firm in the Northeast, institutional specialization.
  • “Busy, but financing is killing projects. Bank loans have almost stopped.” — 52-person firm in the South, residential specialization.
  • “Accounts receivable are rising past 60 days to over 90. Project delays due to funding and scaled back scopes because of interest rates may lead to layoffs if we can’t find other opportunities.” — 10-person firm in the Midwest, commercial/industrial specialization.

Stay Informed

Mark your calendar! Join Kermit Baker, AIA’s Chief Economist, on Thursday, October 19 at 2 PM ET for the next quarterly update on the latest economic data and industry reports. Register for this insightful event for free.

Download ABI July 2023 (PDF)

Source: www.aia.org with additional information added by Apazone

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