ABI May 2025: Despite persistent softness, fewer firms report declining billings

Architecture firm billings continued to decline in May

The modest uptick in the AIA/Deltek Architecture Billings Index (ABI) score to 47.2 for the month means that fewer firms reported a decrease than in April. In addition, inquiries into new work increased this month for the first time since January, reflecting the modest degree of stabilization in the economy recently. However, the value of new signed design contracts continued to decline, indicating that while clients are starting to explore new projects, they remain hesitant to sign a contract committing to them.

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Business conditions remained soft at firms in all regions of the country in May, although firms located in the South came close to reporting growth. The pace of the decline in that region has slowed over recent months, and firms in that region may be the first to experience growth again. However, firms of all specializations reported declining billings this month, although the pace of the decline slowed at firms with a multifamily residential specialization. Firms specializing in that type of work, as well as in institutional work, look like they’ll be the first ones to turn the corner to growth when conditions start to improve.

Economic activity continues to decline across much of the country

Overall conditions were mixed this month in the broader economy. In the latest edition of the Federal Reserve’s Beige Book report, released on June 4, respondents reported that overall economic activity declined across the country over the previous few weeks, with six districts reporting declines, three reporting flat conditions, and three reporting slight growth. New home construction was generally flat or slowing, although there were slight increases in some areas, like the Cleveland district. Nonresidential construction activity slowed in the Boston, New York, Cleveland, Minneapolis, and San Francisco districts, but was flat in the Minneapolis district and increased slightly in the Chicago district, due to demand for data centers and medical offices.

In addition, nonfarm payroll employment added 139,000 new positions in May, just below the average monthly gains of the previous 12 months. And architectural services employment ticked back up slightly in April (the most recent data available), adding 900 new jobs. Employment in the industry has fluctuated up and down for most of the year, but remains below the higher levels of early 2024.

Most architecture firms track design staff chargeability/utilization rates 

This month, we asked architecture firm leaders for more information on how they use data on staff chargeability/utilization rates at their firm. Overall, nearly three-quarters of responding firm leaders (72%) reported that they track chargeability/utilization rates for design staff at their firm. This share was significantly higher at large firms, where 91% of firms with annual billings of $5 million or more reported tracking this information, versus just 15% of firms with annual billings of less than $250,000, and 49% of firms with annual billings of $250,000 to $1 million. Of the remaining firms, 22% reported not tracking this information, and 6% reported that this data was not applicable because they are a sole practitioner or for some other reason.

At the firms that track design staff chargeability/utilization rates, nearly all of them (83%) indicated that they have a target/budgeted chargeability/utilization rate for design staff this year. On average, the targeted/budgeted chargeability/utilization rate for design at firms this year is 77.5%, although some firms reported a target rate as low as 58% and others reported a target rate as high as 95%.

Firms that track this data also reported that current chargeability/utilization rates for design staff are, on average, the same currently as they have been in recent years (44% reporting) or are now lower (43%). Just 13% of responding firm leaders indicated that chargeability/utilization rates for design staff are higher now than in recent years.

Finally, we asked firm leaders how they use design staff chargeability/utilization rate data at their firm. More than two-thirds (70%) reported using the data to determine whether design staff are over-/underworked, and 65% use it to determine staffing adjustments (e.g., laying off underperforming staff, shifting under-utilized staff to other teams/projects). An additional 52% use the data to determine project assignments,  51% to determine hiring needs, and 38% to determine service fees. A smaller share of firms report using the data to determine design staff bonuses, raises, promotions, and benefits, and several responding firm leaders wrote in that they use it to help determine firm profitability.
 

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

• “We continue to receive lots of inquiries and leads. Many have converted into studies and/or preliminary design, but projects are still very slow to get going.”—7-person firm in the Northeast, institutional specialization
• “Very slow to get contracts signed. We’re branching outward beyond our regular project types and clients.”—9-person firm in the South, commercial/industrial specialization
• “Market opportunities and billable contracts are picking up more and more from the bumpy ride we had in 2024. Pent up demand slowly releasing.”—20-person firm in the Midwest, residential specialization
• “Work is definitely slowing down. We have had two people leave the firm for other opportunities and we have no plans to replace them.”—10-person firm in the West, institutional specialization