Architecture Billings Remain in Decline

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Value of newly signed design contracts drops for third month in a row

THE MOST RECENT REPORT: July 24, 2024

WASHINGTON – Business conditions remained soft at architecture firms in June with the AIA/Deltek Architecture Billings Index (ABI) reporting a score of 46.4. Any score below 50 indicates a billings decline, although this month’s score indicates that somewhat fewer firms reported a decline in billings in June than in May.

"Architecture firms continue to face a period of headwinds in the construction sector, driven by elevated interest rates, high construction costs, and generally weak property values,” said Kermit Baker, PhD, AIA Chief Economist. “This is the seventeenth consecutive month of a billings decrease and yet, despite the softness firms remain generally optimistic that conditions will start to improve once interest rates begin to ease.”

Indicators of future work remained generally soft as well:

Only slightly more than half of the responding firms reported an increase in inquiries into new work.
Firms reported a third consecutive month of decline in value of newly signed design contracts.
While many firms still have a healthy backlog of projects in the pipeline, 6.4 months on average, this is the lowest that backlogs have been in more than three years.

The ABI score is a leading economic indicator of construction activity, providing an approximately nine-to-twelve-month glimpse into the future of nonresidential construction spending activity. The score is derived from a monthly survey of architecture firms that measures the change in the number of services provided to clients.

Key ABI highlights for June include:

Regional averages: Northeast (52.2); Midwest (40.9); South (43.9); West (43.1)
Sector index breakdown: commercial/industrial (42.0); institutional (44.3); mixed practice (firms that do not have at least half of their billings in any one other category) (46.9); multifamily residential (45.1)
Project inquiries index: 51.6
Design contracts index: 45.6

Regional and sector categories are measured as three-month moving averages and may not align with the national score.

Inside Lighting strives to accurately report certain data on the day it is reported by the AIA, but updates to past data with new three-month rolling averages might not be made. For official and most current reports, refer to the AIA ABI numbers. All ABI data is sourced from the AIA.

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Interpreting the ABI:

The Architecture Billings Index (ABI) is a leading economic indicator of construction activity. It is produced by the American Institute of Architects (AIA) and it reflects the approximate nine-to-twelve month lead time between architecture billings and construction spending.

The ABI is based on a monthly survey of architecture firms that asks respondents to rate the level of their billings (or the amount of new design contracts) as either "increase," "decrease," or "no change" from the previous month. The results are then compiled into an index, where a score above 50 indicates an increase in billings, and a score below 50 indicates a decrease in billings.

The ABI is widely used in the construction industry, as well as by economists and analysts, to track the health of the construction market and to forecast future building activity. It is considered a leading economic indicator because changes in architecture billings often precede changes in overall economic activity, such as employment and GDP.

The ABI provides a snapshot of the demand for design services as well as an indication of the near-term outlook for the construction industry.

The survey panel asks participating architectural firms whether billings increased, decreased or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month.

An index score of 50 indicates no change in firm billings versus the previous month.
A score above 50 indicates an increase in firm billings versus the previous month.
A score below 50 indicates an decrease in firm billings versus the previous month.
NOTE: Index numbers cited for the last three reported months are preliminary.
The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Source: The American Institute of Architects (AIA)