Friday, April 1, 2011

Architecture Firm Billings Increase Slightly in February

The American Institute of Architects’ Architecture Billings Index showed improvement in February, as the average billings have increased slightly since January. Although growth remains slow compared to late 2010, the trend remains a sign of recovery.

The Architecture Billings Index (ABI) serves as the leading economic indicator of construction activity, and reflects the approximate 9-12 month lag time between architecture billings, and actual construction spending. The monthly ABI scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline.

The ABI recorded a score of 50.6 in February, meaning billing levels increased slightly since the month prior. Since this is now the fourth month in a row the ABI has registered a score of 50 or higher, the case can be made that we are currently on the road to recovery in the architecture industry. Inquiries into new projects remain strong at firms, and while the majority of firms reported that the value of new contracts remained about the same in February as in January, nearly 1/4 indicated that the value increased by 5 percent or more for the month.

Firms in the Midwest and South reported a continued increase in billings, while those in the Northeast declined slightly for the second month in a row after showing growth in the second half of 2010. While that stat may be discouraging to firms in the Northeast, it’s important to keep in mind the effect the harsh winter weather has on work in that region annually.
Index results by firm specialization were also mixed for the month. Firms with commercial and industrial specialization reported improving business conditions in February. This marks the eight consecutive month that these firms had a score above 50; a promising sign of sustainable recovery. Firms that specialize in residential (primarily multifamily) and institutional projects however, faced a decrease in work for the month.

The overall economy showed signs of picking up in February, as 192,000 new jobs were added to total nonfarm payrolls and the national unemployment rate fell to 8.9 percent, the first time it has been below 9 percent in 22 months. Construction employment contributed to this growth, adding 33,000 new jobs.

ARRA Funding

Since the federal government’s American Recovery and Reinvestment Act (ARRA) was enacted in 2009, nearly 1/4 (24%) of the firms surveyed reported that they have received revenue from projects funded through the program. This was a significant increase compared to only 21.8 percent of firms in 2010. 4 in 10 firms that have received revenue from ARRA projects reported that these projects accounted for less than 5% of their firm billings in 2009 and 2010, 33% said that these projects have accounted for 5-10% of their billings, and just 7% of firms reported that ARRA projects account for 25% or more of their billings.


By region, the ABI breaks down as follows from January to February: Northeast is down 46.4 from 50.4, West is up 49.1 from 47.3, South is down 50.1 from 51.5, and Midwest is down 55.3 from 56.4.

By market sector: Residential is down 49.7 from 53.7, Institutional is down 48.9 from 51.3, Commercial/Industrial is up 55.0 from 54.6, and mixed is up 51.3 from 48.7.

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

• Inquiries are up substantially and projects that had been delayed for funding are beginning to be approved for construction. State government is likely to release several shovel ready projects that had not been previously funded.
—165-person firm in the Northeast, institutional specialization

• Poor, but a little improvement. I am one signature away from doing my first complete new building project in two years. On the flipside, I am downsizing my office again.
—1-person firm in the West, commercial/industrial specialization

• We simply cannot get enough work moving to bring in money to keep everyone paid every week. Our client base is [a multifamily] developer, and while the news reports that apartments will be coming back first, we have not seen that as reality.
—5-person firm in the South, residential specialization

• Mergers and acquisitions within the healthcare industry have brought a lot of work to a stop until restructuring and the status of healthcare reform is better determined. This market has carried us through the recession, but now seem to be entering a recession itself.
—19-person firm in the Midwest, institutional specialization

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