Architecture Firms See No Relief in August

For the third consecutive month, a key index from the American Institute of Architects shows reduced billings and construction activity.
Kermit Baker, Chief Economist, American Institute of Architects. Image courtesy of American Institute of Architects

Architecture firms continued to struggle in August as a result of consequences of the COVID-19 pandemic, with business conditions remaining in decline, leaving commercial construction activity down, according to a new report from the American Institute of Architects.

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AIA’s Architecture Billings Index for August mirrored that of June and July with a score of 40, indicating that the pace of decline made no movement toward stabilization.

“We had hoped to see the index rise month by month. Even though we expected the index to remain below the 50 threshold, signifying a decline in revenue at firms, we were expecting to close that gap a bit instead of remaining at the steady rate of decline,” Kermit Baker, chief economist with the American Institute of Architects, told Commercial Property Executive.

Despite the overall decline, there were a few rays of light in August. The value of new design contracts rose month-over-month from 41.7 to 46, and for the first time in six months, inquiries into new projects increased, reaching an index score of 51.6.

DISPARITIES

Firms in the Northeast, which saw soft pre-pandemic billings and was most severely impacted by the coronavirus, experienced the worst business conditions of the four national regions last month, recording an ABI score of just 33.9. “The Northeast continues to show weak ABI scores, and we don’t have a good explanation for that,” Baker said.

The Midwest, South and West logged respective scores of 41.7, 41.6 and 41.3. “Given the manufacturing and agricultural economic bases for the Midwest, it’s not surprising that this region is holding up as well as the others,” Baker added.

 At the sector level, August did not bring positive change for firms specializing in commercial and industrial design, as weak conditions lingered. The ABI score came in at just 35.5.

Institutional design firms fared better than commercial/industrial, with an ABI score of 40.2, and mixed-practice firms recorded a score of 41.9. Conversely, stabilization persisted in August for firms with a specialization in multifamily.

And for the most part, overall billings for these businesses grew for the first time in seven months, pushing the ABI score up to 49.4. The score serves as an industry forecast of sorts. “The multifamily residential index is the strongest of any sector, indicating that the residential sector will recover faster than the commercial, industrial or institutional sectors,” Baker noted.