After 20 months of declines, architecture firm billings were flat in October. The American Institute of Architects’ (AIA) AIA/Deltek Architecture Billings Index (ABI) score for the month was 50.3, meaning that the share of firms which reported declining billings was essentially equal to the share of firms that reported increasing billings.
In addition, inquiries into new projects ticked up in October to the highest level in six months. However, despite declining interest rates and softening inflation, clients remain hesitant to start new projects. The value of newly signed design contracts softened further in October, as they declined for the seventh consecutive month. Responding firms in October indicated that many clients were still awaiting the outcomes of the November elections, at both a national and more local level, before determining how to proceed on new projects.
Business conditions varied significantly across the country in October. While firms located in the Northeast saw billings decline further from September, firms located in the South reported billings growth for the first time in two years. And while billings continued to decline at firms located in the Midwest and West, the pace of the decline in those regions slowed from recent months. Conditions also varied at firms of different specializations in October. Firms with an institutional specialization saw slight billings growth for the first time since January, while business conditions remained softer at firms with multifamily residential and commercial/industrial specializations.
Architecture firms continue to shed employees. Conditions have remained mixed in the broader economy recently. While overall nonfarm payroll growth stalled in October with just 12,000 new positions added on net, the construction industry is still hiring. Overall construction employment grew by 8,000 new positions in October, while nonresidential specialty trade contractors added 14,000 new positions. However, architectural services employment continued its recent decline in September (the most recent data available), shedding an additional 400 positions. Total employment in the industry now stands at 203,100, down 3,000 positions since the beginning of the year and at the lowest level since 2022. In addition, the Federal Reserve lowered interest rates by another 0.25 percentage points in early November, still hoping to meet their desired goal of an inflation rate of around 2 percent. Another decrease of 0.25 percentage points is still expected before the end of the year, which should help the economy even more.
Architecture firms are more optimistic about their revenue heading into 2025. In October, AIA asked architecture firm leaders about how revenue at their firm this year compares to last year and how they expect it to change in 2025. Overall, more than four in 10 responding firm leaders (41 percent) indicated that they estimate that their firm’s revenue will be up this year compared to 2023, with average growth of 0.4 percent projected. However, more than one-third (36 percent) project a decline, and the remaining 23 percent expect it to remain within 5 percent of last year. Firms located in the Northeast and firms with an institutional specialization expect the largest revenue growth this year, with projected increases of 2.5 percent and 3 percent, respectively. On the other hand, firms located in the Midwest, and those with multifamily residential and commercial/industrial specializations, expect their billings to decline this year from 2023.
