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ABI Backslides in December

Business conditions at architecture firms backslid in December, ending a tough year on a disappointing note. The AIA’s Architecture Billings Index score declined to 42.6 for the month, indicating that more firms saw declining billings in December than in November. Although some year-end softness is to be expected at many firms, the ABI analysis takes these seasonal factors into account, so it is unlikely the decline is due to just the typical December slowdown, say analysts. Instead, ongoing uncertainty with an increase in COVID-19 cases and delays on the new stimulus package until late in the month are more likely contributors to the decline.

However, firms do remain relatively optimistic about 2021, and the indicators of future work tend to support that. Inquiries into new projects at firms increased for the fifth month in a row in December, and while the pace of growth was slower than in September and October, it still means that most firms are having project discussions with potential clients. And while the value of new design contracts decreased for the second consecutive month after rising in October, it remained near the 50 threshold, indicating that a nearly equivalent share of firms saw an increase in new contracts signed as saw a decrease.

In addition, firm backlogs remained generally steady from the third quarter to the fourth quarter of 2020, declining slightly from an average of 5.4 to 5.3 months. This remains about a month below pre-pandemic backlog levels for the last two years, but has improved from the first quarter, where they fell all the way to 5.0 months from 6.3 months in the fourth quarter of 2019.

By region of the country, business conditions remained softest at firms located in the Northeast in December. The decline in firm billings was slightly less serious at firms located in the South, while conditions softened further at firms located in the Midwest and West. In addition, firms of all specializations saw billings decline this month; firms with a commercial/industrial specialization continued to approach a turnaround in business conditions, still largely led by increased demand for warehouse and distribution facilities.