ABI January 2021: Though Billings Continue Decline, Design Firms Report Optimism

After experiencing more disappointing business conditions in December, fewer architecture firms reported declining firm billings in January, according to the American Institute of Architects. Despite an Architectural Billings Index score of 44.9, indicating that the majority of firms reported a decline in billings for the eleventh consecutive month, there are increasing signs of optimism, say analysts. Inquiries into new work at firms reached its highest level since the pandemic began, while the value of new design contracts also approached growth once again, following two months of weaker conditions. With vaccinations picking up speed, and plans for additional relief measures making their way through Congress, there may be more reasons for hope ahead.

Commercial firms remain steady

However, business conditions remain largely soft at firms throughout the country. Firms located in the South are closest to returning to billings growth, while firms located in the Midwest and West have seen conditions weaken further every month for the last several months. Business conditions have also noticeably softened at firms with a multifamily residential specialization recently, which were the first to return to growth in late last summer. Business conditions have remained at an essentially steady pace of decline at firms with commercial/industrial and institutional specializations for the last several months.

Outlook is positive on revenue returning to pre-pandemic levels

This month’s special practice questions asked responding firms about the current status of their projects that were active in the first quarter of 2020, prior to the onset of the COVID-19 pandemic. On average, architecture firms reported that few of those projects have been completely cancelled, with 93 percent of firms reporting that at least a few of their firm’s active projects from the first quarter of 2020 have since been successfully completed with no major delays or issues. And while just 2 percent of firms overall reported that all their active projects from the first quarter of 2020 have since been completed, 35 percent indicated that most have, and 22 percent indicated that many have.

However, nearly 14 percent of responding firms indicated that more than a few of their active projects from the first quarter of 2020 have been stalled or postponed and have not yet restarted, with 17 percent of firms with an institutional specialization reporting the same, versus just 7 percent of firms with a multifamily residential specialization. And while just 5 percent of firms indicated that more than a few of their pre-pandemic projects have been cancelled outright, that share grows to nearly 8 percent of firms with a commercial/industrial specialization reporting the same.

Survey respondents were also asked about when they expect their firm’s revenue to return to pre-pandemic levels, and the responses were generally positive―23 percent of firms indicated that revenue levels have already returned to, or are exceeding, pre-pandemic levels, and an additional 41 percent expect to return to those levels by the end of 2021. Just under one third of firms, 32 percent, expect to return to pre-pandemic revenue levels by the end of next year or later, while only 4 percent fear that they will never return to that level. Optimism was highest among firms with a multifamily residential specialization, with 36 percent reporting that their revenue has already returned to or exceeded pre-pandemic levels, while firms located in the Northeast were most likely to indicate that they expect that revenue levels won’t rebound until 2022 or later.