Economic Uncertainty Weighs on Architecture Billings

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Inflation and high interest rates slow new design contracts and project starts

THE MOST RECENT REPORT: February 19, 2025

WASHINGTON – Architecture firms reported another decline in billings in January as the AIA Architecture Billings Index (ABI) was 45.6. Any score below 50.0 indicates decreasing business conditions.

While most architecture firms saw billings decline in January, the proportion experiencing a decrease was slightly lower than in December. Inquiries for new projects continued to rise at a steady, slow pace, but the value of newly signed design contracts dropped for the eleventh month in a row, as clients stayed cautious amid ongoing economic uncertainty.

“Stubborn inflation, persistently high interest rates, and labor concerns continue to weigh on the willingness of owners and developers to move ahead with construction projects,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Architecture firms have been moving to right-size their operations in response to softer market conditions. There was a net loss of 1,400 positions at architecture firms nationally in 2024, and firm employment has declined by a total of 4,100 positions since the post-pandemic peak in June 2023.”

Billings were soft across all regions and specializations in January. Firms with a commercial/industrial focus reported the most significant decline in business conditions, but weakness was observed across all sectors. Business conditions remained weakest in the Northeast, continuing a trend from recent months.

Key ABI highlights for December include:

Regional averages: West (48.8); South (46.0); Midwest (45.6); Northeast (41.1)
Sector index breakdown: institutional (47.4); multifamily residential (45.0); mixed practice (firms that do not have at least half of their billings in any one other category) (44.3); commercial/industrial (43.1)
Project inquiries index: 51.4
Design contracts index: 46.2

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)