Business conditions at architecture firms ended 2021 on a high note, with an Architecture Billings Index score of 52.0 in December 2021; 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 the American Institute of Architects started collecting this data in 2010, at an average of 6.5 months.
End-of-year conditions vary by region and specialty
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 percent 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.