ABI April 2017: Firm billings grow at slower pace
The majority of architecture firm projects are located in the managing firm’s city or state
Architecture firm billings increased for the third consecutive month in April. However, the Architecture Billings index (ABI) score of 50.9 for the month indicates that fewer firms reported billings growth this month than in March. Firms indicated that plenty of work remains in the pipeline, though, as inquiries into new projects and the value of new design contracts both increased again in April.
Business conditions also improved at firms in all regions of the country in April, marking only the second time in the last 12 months that this has occurred. Billings growth was strongest at firms located in the midwest and south, while growth tended to be more modest at firms in the rest of the country. Firm billings also grew at firms of all specializations this month, with the exception of a very modest decline for those with a residential specialization. On the other hand, firms with an institutional specialization have seen particularly strong growth in billings over the last several months.
In the broader economy, nonfarm payroll employment grew at a steady clip in April, adding 211,000 new jobs. Architectural services employment also continued to grow at a steady pace, adding an additional 1,700 jobs in March. The sector has now added back more than half of the jobs that were lost during the economic downturn, and continues to grow. The latest edition of the Federal Reserve’s Beige Book report on economic conditions around the country reported that nonresidential construction remains generally strong in all regions, though it is slowing modestly in areas like the Boston and New York City Districts. Residential construction is also increasing, although the pace of growth of home sales has moderated somewhat.
Local or international: Where are your projects located?
This month’s special practice question asked responding architecture firms to break out the share of the projects managed out of their office by location of the project, from the very local (the city/town/metro area where their office is located), to international projects outside of the U.S. and its territories. On average, firms reported that nearly eight in ten of their projects (on a dollar basis) were located in their immediate city, metro area, or state (79 percent); while the remaining share (21 percent) were from projects located in the firm’s larger region of the country (Northeast, Midwest, South, West), the rest of the U.S., or outside of the country. Small firms, with annual billings of less than $250,000, reported that an even larger share of their projects were local to their city or state (87 percent), while large firms, with annual billings of $5 million or more, indicated that a much larger share of their projects (35 percent) were located in the in their larger region, the rest of the country, or internationally.
Firms with a residential specialization reported the largest share of projects located in their city (61 percent), while firms with an institutional specialization reported the smallest share, 46 percent. Firms with an institutional specialization had the largest share of projects located outside of their city but within their state (35 percent), while firms with a commercial/industrial specialization had the largest share of projects located outside of their region but within the United States (11 percent) as well as internationally based projects (2 percent).
This month, Work-on-the-Boards participants are saying:
- "Project demand remains strong, though fast escalation of labor, costs, and material increases are dampening actual starts." —78-person firm in the Northeast, residential specialization
- "Construction activity is staying strong and it is increasingly hard to find good subcontractors." —15-person firm in the Midwest, institutional specialization
- "Generally very good. However, there is a huge labor shortage and we are forced to overpay for less experienced employees." —54-person firm in the West, mixed specialization
- "Still mixed based on oil prices, but newcomers are creating demand for new construction." —8-person firm in the South, commercial/industrial specialization
ABI April 2017