ABI June 2017: Firm billings start summer on a strong note

ABI June 2017 hero (updated)

More than half of firms are hiring new architectural employees

Architecture firms continued to report strong business conditions to start the summer, with AIA’s Architecture Billings Index (ABI) climbing by more than a point from May to a score of 54.2 in June (any score over 50 indicates billings growth). While billings have trended slightly up and down over the last year, they have been on a positive trajectory for the last several months. Despite growth in inquiries into new projects and the value of new design contracts dipping slightly in June, firms continue to report robust backlogs averaging 5.9 months and indicate a steady supply of work in the pipeline.

Business conditions were strong in all regions of the country in June. Architecture firms located in the Northeast reported billings growth for the first time in three months, and billings remained strong for firms located in the South, which has seen the largest share of firms reporting growth for the last five months. Firms with a residential specialization saw robust billings in June, while business conditions also remained positive at firms with an institutional specialization as well as those with a commercial/industrial specialization.

The overall national economy generally remained strong in June as well, with total nonfarm payroll employment increasing by 222,000 positions. Construction employment has been essentially flat this year, and while architectural services employment declined modestly from April to May (the most recent data available), the sector has still added nearly 7,500 positions in the last year. The latest edition of the Federal Reserve’s Beige Book report, released on July 12, shows that economic activity continued to expand across the country in June, with most regions anticipating further growth in the coming months. Construction activity was generally flat to modestly expanding across the country, with the Minneapolis and Atlanta districts showing increases in nonresidential construction, while residential construction slowed in the Philadelphia district and multifamily construction softened in the Atlanta district.

Dissecting hiring needs and incentives

This month’s special practice questions asked responding architecture firms about recent hiring needs at their firms and incentives offered to attract new employees. Nearly six in 10 firms reported that they have recently hired, or are looking to hire, new architectural employees. Large firms were much more likely to report interest in hiring, with 87 percent of firms with annual billings over $5 million indicating that they have recently hired or are looking to hire new architectural employees, in comparison to 18 percent of firms with annual billings of less than $250,000.

For those architecture firms that have recently hired or are looking to hire new architectural employees, emerging professionals on the path to licensure are in the highest demand. Nearly three quarters of these firms (72 percent) reported that they have filled or are looking to fill that position, with large firms more likely than small firms. For other architectural staff positions, 47 percent of these firms reported that they have hired or are looking to hire architects/designers, 27 percent senior design/project management staff, and 6 percent principals/partners or other senior staff. The majority of these firms, regardless of size, indicated that they were unlikely to hire senior staff in the near future.

Most of the responding architecture firms that have recently hired, or are looking to hire, new architectural employees also reported that they offer a wide variety of benefits and perks to attract new hires at least some of the time, including the potential for performance bonuses, salaries above what competing firms might offer, firm contribution toward a retirement program, and quality of life benefits (e.g., transportation programs, gym memberships, pet-friendly offices, in-office meals). Sign-on bonuses, on the other hand, were not very popular, with just 37 percent of these firms indicating that they only offer them sometimes, and nearly two thirds of firms (63 percent) reporting that they never offer them.

Overall, the largest share of these firms (89 percent) indicated that offering salaries above what competing firms might offer was very or somewhat important to new hires’ decision to join the firm, followed by the potential for performance bonuses (84 percent very/somewhat important), firm contribution toward retirement (79 percent very/somewhat important), and quality of life benefits (76 percent very/somewhat important).

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

  • "Activity is strong in core sectors, but costs to construct are increasing and it is more difficult to get projects started. There is more analysis and start/stop in developer processes than ever before." —185-person firm in the Midwest, residential specialization
  • "We have received several calls from private business concerns, which has not been the case in recent months and years." —8-person firm in the South, institutional specialization
  • "Hospitality is still very strong. We are turning away work or asking potential clients to wait, if they can." —17-person firm in the West, commercial/industrial specialization
  • "There is a bit of a 'boomlet' going on in new work for small to mid-size firms. Several larger firms are working through their backlog rapidly. We do not expect this boomlet to continue through the end of 2017." —2-person firm in the Northeast, institutional specialization

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ABI June 2017 hero (updated)