ABI Shows Commercial Construction Drop

FRIDAY, MAY 1, 2020

The American Institute of Architects recently released its Architecture Billings Index (ABI), revealing a record drop in demand for design services from architecture firms during the month of March.

AIA reports that the index “reflects just how quickly and fundamentally business conditions have changed across the country and around the world in the last month as a result of the COVID-19 pandemic.”

Index Numbers

According to AIA, a score over 50 in the ABI indicates increasing billings, while a score below 50 indicates a decline in billings.

However, last month’s index report reveals a 20.1 drop in points to a score of 33.3. The score nearly doubles the decrease of 9.4 points experienced at the beginning of the 2001 recession and the loss of 8.3 points recorded during the Great Recession, making it the index’s largest single month decline in its nearly 25-year history.

While it remains uncertain how long economy shutdowns will last, indicators of future work, like new project inquiries and new design contracts also experienced a steep decline, reporting scores of 23.8 and 27.1, respectively.

AIA notes that billings were reported to have declined across all regions of the country and in all firm specializations, revealing softened conditions, particularly in the Northeast. This information is likely connected to the various construction shutdowns experienced in New York City and construction stop order in Boston, however.

Although firms with a commercial/industrial specialization also reported a more slightly modest decline, in contrast, firms with an institutional specialization saw the smallest of declines, most likely due to an increase in work needed for the construction of more healthcare facilities. Schools were also reported to be making early headway on projects, as many are closed for the rest of the academic year.

In addition to issuing the ABI, in mid-March, the AIA also asked responding firms a series of questions about actions they’ve taken so far in response to the COVID-19 pandemic, and how they think the pandemic, and ensuing economic downturn, will impact their firms through the end of the year.

In tallying the responses and varying concerns, AIA reports that responding firms expect, among other things, to see a 15% decrease in billings during the month of April; to expect a decline in revenue through the end of the second quarter, with a third of firms expecting a loss of 25% or more; and revenue losses of 17% over the next three months.

To adjust to these financial changes, AIA reports that:

  • 53% of firms have implemented a hiring freeze;
  • 32% of firms have frozen staff salaries;
  • 13% of firms have reduce staff;
  • 12% of firms have reduced salaries;
  • 10% of firms have implemented staff furloughs; and
  • 8% of firms have converted some or all positions from full-time to part-time.

Overall, a little over half of the respondents report that the although the economic slowdown is expected to significantly impact its business, they believe it is manageable.

“More than three quarters of firms (76%) expect that by the end of the year they will have trimmed all unnecessary expenses at their firm to stay in the best possible financial position, while 66% anticipate that their annual revenue will be considerably lower than it is at present, and 59% expect that they will have implemented changes so that their firm will be operating much more efficiently,” AIA states.

For the full report, click here.

Other AIA Insights

In March, AIA 2020 President Jane Frederick, FAIA, and EVP/CEO Robert Ivy, FAIA, released a letter to Congress outlining a proposed infrastructure investment and addressing what it views as critical needs from small business owners during the COVID-19 pandemic.

The AIA requested investment in 21st Century Infrastructure as well as temporary relief measures for business owners.

The AIA proposed:

  • investing in Small Business Interruption Loans for businesses under 500 employees to cover the costs of payroll while employees may not be able to work due to their own health concerns or the effects of social isolation
  • increasing access to unsecured credit to all employers so that they can cover costs associated with payroll, rent and other obligations in the immediate term
  • suspending the collection of business taxes, including payroll tax, for the duration of the pandemic; and
  • suspending the current policy limiting what losses pass-through entities may deduct as many architecture firms are pass-through entities and they should be able to deduct all losses incurred this year in the next tax cycle.

The AIA also proposed sustained investment to revive the economy once the initial health crisis has passed.

Last month, the AIA launched a task force to help inform public officials, healthcare facility workers and architects on adapting buildings into temporary healthcare facilities, in addition to providing a new webinar that addresses how provisions included in AIA contract documents can help address issues arising from the health crisis.

View all of PaintSquare Daily News' coverage on COVID-19, here.


Tagged categories: American Institute of Architects (AIA); Architects; Business management; Business matters; Business operations; Commercial / Architectural; Commerial/Architectural; COVID-19; Economy; Good Technical Practice; NA; North America; Projects - Commercial; Research and Markets

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