ABI January 2021: Architecture firms report some signs of optimism amid the ongoing decline in billings

While some projects have been delayed due to the pandemic, few have been cancelled outright

After experiencing more disappointing business conditions in December, fewer architecture firms reported declining firm billings in January. Despite an ABI 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. 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.

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. Billings at firms with a residential specialization have now declined for three consecutive months as demand for multifamily housing has waned, even as demand for single-family residential, not measured by the ABI, has strengthened. Meanwhile, business conditions have remained at an essentially steady pace of decline at firms with commercial/industrial and institutional specializations for the last several months.

Architecture services employment continues to rebound

Conditions in the broader economy were mixed in January. On one hand, the Conference Board’s Consumer Confidence Index showed signs of improvement, as consumers were increasingly optimistic about the future. However, consumers indicated that they remain fairly concerned about conditions at the present, largely due to the ongoing impact of the pandemic. In addition, the Bureau of Labor Statistics reported that nonfarm payroll employment was essentially flat in January, with just 49,000 new jobs added, although the unemployment rate did decline by 0.4 points to 6.3%. But architecture services employment continued to rebound in December, the most recent data available, adding an additional 700 positions. The industry saw a net loss of 7,500 positions from December 2019 to December 2020, but continues a slow but steady return to its pre-pandemic peak of 199,200 jobs.

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% 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% of firms overall reported that all their active projects from the first quarter of 2020 have since been completed, 35% indicated that most have, and 22% indicated that many have.

However, nearly 14% 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% of firms with an institutional specialization reporting the same, versus just 7% of firms with a multifamily residential specialization. And while just 5% of firms indicated that more than a few of their pre-pandemic projects have been cancelled outright, that share grows to nearly 8% 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% of firms indicated that revenue levels have already returned to, or are exceeding, pre-pandemic levels, and an additional 41% expect to return to those levels by the end of 2021. Just under one third of firms (32%) expect to return to pre-pandemic revenue levels by the end of next year or later, while only 4% fear that they will never return to that level. Optimism was highest among firms with a multifamily residential specialization, with 36% 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.

This month, Work-on-the-Boards participants are saying:

  • “We are busy, but with smaller projects than pre-pandemic.”—7-person firm in the Midwest, institutional specialization
  • “Nevada, and especially Las Vegas, have been dramatically impacted by the pandemic. Hospitality is beginning to recover, but it will take time for the public to be comfortable coming back to areas with large gatherings of people.”—40-person firm in the West, commercial/industrial specialization
  • “The market outside of multifamily residential in the Northeast is still very soft. We are seeing some movement in higher education, but the RFPs are generally for very small projects.”—30-person firm in the Northeast, institutional specialization
  • “We are still seeing ebbs and flows. Many of our competitors are still having layoffs even though it appears the market has stabilized. The companies that are doing better than okay are those that are nimble and able to adapt to the changing landscape.”— 83-person firm in the South, commercial/industrial specialization

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