ABI June 2021: Architecture firm billings continue to grow at a robust pace
Nearly six in 10 firms report that they are having problems filling open architectural staff positions
Architecture firms reported another month of extremely strong business conditions in June, with an ABI score of 57.1 (any score over 50 indicates billings growth). While slightly fewer firms reported an increase in firm billings in June than in May, the current pace of billings growth remains near the highest levels ever seen in the history of the index. In addition, inquiries surged to a new all-time high score of 71.8, and the value of new design contracts remained very high as well, with a score of 58.9. In addition, firms reported their highest backlogs in two years, with an average of 6.5 months. This ties the all-time high average since we started collecting backlog data on a quarterly basis in 2010, and follows a plummet down to just 5.0 months at the start of the COVID-19 pandemic.
Business conditions remained robust at firms in all regions of the country in June as well, with firms located in the Midwest reporting the strongest growth for the fourth consecutive month. Billings have also surged at firms located in the West recently as well. By firm specialization, firms with a commercial/industrial specialization saw another particularly strong increase in billings this month, while conditions remained very strong at firms with multifamily residential and institutional specializations as well.
US economy continues to improve
The latest edition of the Federal Reserve’s Beige Book report, released on July 14, shows that the US economy continued to grow at a generally robust pace throughout June and into early July. This surge was largely led by above average growth in the transportation, travel and tourism, manufacturing, and nonfinancial services industries. However, while residential construction slowed in several areas of the country due to rising materials costs, even as lumber prices have eased recently, the San Francisco, Boston, and Philadelphia districts reported increasing demand for multifamily residential construction. Industrial construction was particularly strong in the Boston, Philadelphia, and Dallas districts, while office construction weakened or remained stagnant across much of the country, particularly in the New York district.
Nonfarm payroll employment also showed strong gains in June, adding 850,000 new positions, nearly 300,000 more than were added in May. However, construction employment declined by 7,000 positions, and remains more than 238,000 positions below its pre-pandemic peak. Architecture services employment added 400 new positions in May, the most recent data available, which is fewer new positions than added in the previous few months. However, the industry is now just 4,500 positions below its most recent peak from February 2020.
Turnover rates increasing at some firms
As business has been ramping back up at architecture firms over the last several months, we have heard increasing concerns about firms not being able to find enough workers to meet the higher workload. This month we asked firm leaders about current issues they are having with filling open architectural positions, and about how turnover rates have changed recently. Overall, just under six in 10 responding firms (59%) indicated that they are having problems filling open architectural staff positions, although this rises to 80% of large firms with annual billings of $5 million or more. Firms located in the Midwest and Northeast, and those with an institutional specialization, were also more likely to report problems filling positions.
In addition, firms with problems filling open positions were more likely to report having problems filling all or most of their open architectural staff positions, in comparison to those that reported problems filling just some of their open positions. Just 12% of firms overall reported that they are not having any problems filling open positions, while 27% reported that they don’t currently have any open positions. Small firms were most likely to report not having any open positions, and were also more likely to report not having any problems filling open positions.
On average, half of responding firms (50%) indicated that voluntary staff turnover rates for architectural positions at their firm have been about normal so far this year. Slightly more than one quarter (28%) reported that they have been lower than normal, while 22% reported that they have been higher than normal. However, firms with a multifamily residential specialization were much more likely to report higher turnover rates, with slightly more than one third indicating that they have been higher than normal this year (35%). Most firms also expect turnover rates to be about normal in the second half of the year, with just 21% indicating that they expect them to be higher than normal. Small firms, firms located in the Midwest, and those with a multifamily residential specialization were more likely to expect higher turnover rates later this year.
Of those firms that are predicting higher turnover rates in the second half of this year, the main positions that they expect to experience higher turnover are staff architects (71%) and emerging professionals on the path to licensure (67%), versus 41% that expect higher than normal turnover for design/project managers, and 12% that expect higher than normal turnover for senior staff, principals, and/or partners. And given that higher turnover is expected for more junior positions, the primary reasons for the expected increase in voluntary turnover of architectural staff are those seeking higher compensation (78% rated as very important) and those seeking career advancement/more opportunities emerging (54% rated as very important). Retirements and returning to school were ranked as the least important reasons for an increase in turnover.
This month, Work-on-the-Boards participants are saying:
- “We are experiencing some thawing in the pipeline, and are hopeful that a couple of our largest COVID-interrupted projects will come back to life in the coming weeks.”—146-person firm in the West, commercial/industrial specialization
- “We see strong interest in projects that have long-term impacts, as well as short-term projects. Barring any unforeseen issues, we see a strong period of potential growth.”— 10-person firm in the Midwest, commercial/industrial specialization
- “Our main project that was suspended due to COVID should start next year. We have hired to do pre-design/programming.”—3-person firm in the South, institutional specialization
- “Inquiries remain high, but many projects are not realistic and therefore do not become real projects.”—5-person firm in the Northeast, residential specialization