Although the ABI figure for July of 2021 wasn’t as high as June’s, coming in at “only” 54.6 compared to the prior 57.1, anytime the composite figure goes over 50, it represents growth from the prior month (and anything under 50, decline). Overall, not one region or project sector saw a decline in July, though some grew much more rapidly than others—in other words, a lopsided recovery from last year’s pandemic-induced economic downturn.
“In prior business cycles, architecture firms generally saw their project work soften quickly and then recover slowly,” wrote AIA Chief Economist, Kermit Baker, Hon. AIA, in the release. “So the strength of this recovery is unprecedented. Firm leaders who have leaned into this economic upturn by reinvesting in their firms by hiring staff and upgrading their technology, will likely have a better year than those that anticipated a slower recovery.”
Although construction costs remain high due to a nationwide labor shortage, high material costs, and supply constrictions, the new project inquiries index remained sky high at 65.0, indicating that developers and homeowners are still very much interested in starting new projects in the future. (Though it dipped slightly from June’s near-record high 71.8.) Conversely, the score for newly signed design contracts—the measure of putting pen to paper rather than just demand—lagged behind a bit, remaining at 58.0 in July following a similar 58.9 in June.
On a regional basis, demand across all four sections of the United States seems to be leveling off after its unprecedented growth but with the Midwest remaining on top. In that area, demand in July came in at 58.3, a marked “decline” from 62.0 in June, but still representing month-over-month growth. The West remained in second, sliding to 56.0 in July from 59.7 in June, while the South also stayed in third at 54.6, cooling off a bit from 57.3 in June. The beleaguered Northeast remained dead last with the slowest growth, with demand in July increasing a bit 54.1 in July from 53.2 in June. Not a monumental uptick, but it’s the only region to see a higher level of growth than the month before.
On a sector-by-sector demand basis, firms specializing in commercial and industrial work once again saw the greatest gains, charting 58.4 in July, “down” a smidge from 62.0 in June—with the vaccination rate still climbing, it’s obvious why developers would invest in brick-and-mortar retail experiences and in-person manufacturing, but we’ll need to wait until the August ABI figures are released to see if Delta variant concerns have slowed that down. Demand for firms doing institutional projects, a stalwart sector in past downturns that has been battered by the pandemic as tax revenue and tuition dried up, moved to second place in July and charted at 55.4, compared to 57.3 in June. Multi-family residential demand, however, sunk to 54.7 in July from 57.9 in June; not surprising considering the recent 7 percent dip in housing starts and rising anxiety among homebuilders over the aforementioned material costs and supplies. Finally, firms specializing in mixed-practice work saw demand move to 54.4 in July from 56.4 in June.
Will August’s figures continue the upward trend, or will we see the demand curve flattened by the recent nationwide surge in COVID cases? Only time will tell.