Practicing ArchitecturePracticing Architecture
Architecture Firm Billings Increase Slightly in February
One-quarter of firms have received revenue from ARRA-funded projects
By Jennifer Riskus
AIA Economics Research Manager
The Architecture Billings Index (ABI) score of 50.6 for February indicates that very modest growth occurred at architecture firms that month. Although the pace of growth has slowed from the end of 2010, February still marks the fourth consecutive month that the ABI has been 50 or higher; an encouraging sign for a recovery. In addition, inquiries into new projects remain strong at firms. And while the majority of firms reported that the value of new design/design-build contracts remained about the same in February as in January, nearly one quarter (24 percent) indicated that the value increased by 5 percent or more for the month.
Total jobs at architecture firms declines slightly
While architecture firm billings continued to improve for firms in the Midwest and South regions of the country, they declined slightly for firms in the Northeast for the second month in a row after showing growth in the second half of 2010. This may be due in part to the unusually severe winter weather that affected the region.
By firm specialization, only firms with a commercial and industrial specialization reported improving business conditions in February, where the score for these firms remained above 50 for the eighth month in a row. Firms that specialize in residential (primarily multifamily) and institutional projects suffered setbacks this month, which could very well be temporary impediments.
The overall economy showed signs of picking up in February, as 192,000 new jobs were added to total nonfarm payrolls and the national unemployment rate fell to 8.9 percent, the first time it has been below 9 percent in 22 months. Construction employment contributed to this growth, adding 33,000 new jobs.
However, after adding some jobs in mid-2010, architecture firms shed an additional 1,000 jobs in January, the most current data available. The most recent edition of the Federal Reserve’s Beige Book (a survey of regional economic conditions), released in early March, finds that a broad-based expansion continues in much of the country. Residential real estate remained relatively weak in most districts, with little construction activity reported. However, commercial real estate activity picked up in the Boston, Chicago and Dallas districts, while the Richmond, Kansas City and San Francisco districts have seen an uptick in commercial leasing in recent weeks.
One-quarter of firms surveyed benefit from ARRA funding
Since the federal government’s American Recovery and Reinvestment Act (ARRA) was enacted in 2009, nearly one quarter (24 percent) of the firms on our survey panel reported that they have received revenue from projects funded through the program. One year ago, only 21.8 percent of firms had received ARRA stimulus funding revenue. This year, firms in the South (28 percent) were slightly more likely to report ARRA projects, as were large firms with annual billings of $1 million or more (34 percent). However, four in 10 firms that have received revenue from ARRA projects reported that these projects accounted for less than 5 percent of their firm billings in 2009 and 2010. An additional 33 percent said that these projects have accounted for 5-10 percent of their billings, but just 7 percent of firms reported that ARRA projects account for 25 percent or more of their billings.
For firms that are already receiving ARRA revenue, these federal stimulus projects have accounted for slightly less than 10 percent of project billings over the past two years. Since only about a quarter of firms received any revenue from ARRA-funded projects, about 2.5 percent of project billings across the entire profession over the past two years are estimated to have come from these projects.
As could be expected given the nature of the program, firms have found that the most common project types that received revenue under the federal stimulus program were government buildings—federal, state and local facilities. Housing and modernization projects were also frequently cited, but energy, weatherization and school projects were relatively rare.
This month, Work-on-the-Boards participants are saying:
• Inquiries are up substantially and projects that had been delayed for funding are beginning to be approved for construction. State government is likely to release several shovel ready projects that had not been previously funded.
• Poor, but a little improvement. I am one signature away from doing my first complete new building project in two years. On the flipside, I am downsizing my office again.
• We simply cannot get enough work moving to bring in money to keep everyone paid every week. Our client base is [a multifamily] developer, and while the news reports that apartments will be coming back first, we have not seen that as reality.
• Mergers and acquisitions within the healthcare industry have brought a lot of work to a stop until restructuring and the status of healthcare reform is better determined. This market has carried us through the recession, but now seem to be entering a recession itself.
About the AIA Architecture Billings Index
The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine to 12 month glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI. These monthly results are also seasonally adjusted to allow for comparison to prior months. The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline. The regional and sector data are formulated using a three-month moving average. More information on the ABI and the analysis of its relationship to construction activity can be found in the White Paper Architecture Billings as a Leading Indicator of Construction: Analysis of the Relationship Between a Billings Index and Construction Spending on the AIA web site.