Business Conditions at Architecture Firms End 2021 on a Strong Note

March 2022

Business conditions at architecture firms ended 2021 on a high note, with an Architecture Billings Index score of 52.0 in December (any score over 50 indicates billings growth). Firm billings increased every month of the year except for January, as most firms experienced a strong rebound from the 2020 downturn. And despite a variety of concerns related to the omicron variant; prices/availability of construction materials; and labor shortages, firms also continued to report a robust supply of work in the pipeline, with inquiries into new work and the value of new design contracts both remaining strong, and backlogs remaining near the highest levels ever reported since we started collecting this data in 2010, at an average of 6.5 months.
    
However, conditions were more variable by both region of the country and firm specialization in December. Firms located in the Northeast experienced their fourth consecutive month of declining billings, while firms located in the West saw billings decrease for the second month in a row. Firms located in the Midwest and South continued to report an increase in billings, but the pace of growth has slowed substantially at firms in the Midwest in recent months. Only firms located in the South have continued to report a consistently high level of billings recently. However, firms of all specialization reported a decline in firm billings in December, with only those with a mixed specialization (defined as those firms not having at least 50% of their billings in one of the other three categories: multifamily residential, commercial/industrial or institutional) experiencing growth. Even firms with a multifamily residential specialization experienced a decline in billings for the first time in nearly a year, while firms with an institutional specialization reported their second straight month of softness. There is always some softness in firm billings at the end of the year, due to the holiday season and colder weather, but seasonal adjustment of the data typically smooths much of that out. But because of that, it is too early to say whether this is just a seasonal blip, or the start of a more concerning trend.
    
Construction employment added an additional 22,000 jobs in December as well, notably with 13,000 in nonresidential specialty trade contractors. And architectural services employment added an additional 100 jobs in November, the most recent data available, for a total of 11,000 jobs added through the first 11 months of 2021.
    
Staffing has been an issue of increasing concern for many firms in recent months, with one in five firms reporting staffing issues as a key concern for 2022 in the previous month’s survey.
    
Given anticipated project workloads over the coming months, more than eight in 10 responding firms indicated that they are at least somewhat concerned about being able to recruit and retain staff, with 27% indicating that they are quite concerned, and 10% indicating that they are very concerned. Once again, firms located in the South, as well as large firms, and those with an institutional specialization, were most likely to report a higher degree of concern about being able to recruit and retain enough staff to meet upcoming workloads.