The American Institute of Architects (AIA) has released its final Architecture Billings Index (ABI) report of 2021, and while the composite index ultimately ended the year strong, questions of whether a labor shortage will continue through 2022 still linger.
Despite ongoing hiring difficulties, material and manpower shortages, and the rampant spread of COVID’s Omicron variant dampening construction, the ABI for December 2021 came in at 52.0. (As a reminder, anything over 50 is an increase from the month before, anything under a decrease.) That’s a slight improvement from the already positive 51.0 recorded in November of 2021, and suggests that the bull run we’ve seen over the last 11 months isn’t quite dead yet.
“Since demand for design projects has been healthy over the last year, recruiting architectural staff to keep up with project workloads has been a growing concern for firms,” said AIA Chief Economist, Kermit Baker, in the release announcement. “Architecture is one of the few industries where payrolls have already surpassed their pre-pandemic high, so meeting future staffing needs is a challenge that most firms will need to confront.”
Breaking down the ABI into its constituent measures, inquiries into new projects remained exceedingly strong at 66.8 in December, up from 59.4 the month before, indicating that developers and homeowners were eager to begin or keep building. The index of newly signed design contracts didn’t quite match that enthusiasm, growing to 55.8 in December—the exact same figure as the month before—but it did suggest that people are still willing to open their wallets and begin new projects.
The region-by-region and sector index measures, however, demonstrate that this growth is not spread anywhere close to evenly. Demand for architectural services was strongest in the South in December, growing to 56.4 in December from 53.7 in November and moving up to the best performing section of the United States. The Midwest, which had previously been in first, measured in at 51.0 in December, barely growing from the 57.6 the month prior. The West and East actually saw demand contract; the former to 47.5 in December after growing to 50.9 in November, and the East, historically the worst-performing region during the pandemic, fell to 45.3 in December after an already negative 45.5 in November.
The contraction continues when we break down billings by sector. Firms with mixed practice work under their belt saw billings rise to 60.6 in December, further growing from 56.9 in November. That’s where the good news ends; firms specializing in commercial and industrial projects saw demand decline to 49.2 in December, down from 50.5 the month before. Firms specializing in multi-family residential projects were hit even worse, contracting to 49.2 from the 51.4 reported in November. Firms specializing in institutional projects came out the worst, as billings fell to 47.6 in December from essentially a flat change in demand the month prior at 50.1.
This disparity can be chalked up to how each component of the ABI is measured; the billings and new projects inquiries indexes are measured month-to-month while regional and project type figures are based on rolling 3-month averages.
So, will things pick up in 2022? According to the AIA, firms surveyed for the December ABI reported an average of 6.5 months of work backlog, indicating that demand remains strong even if hiring remains sluggish. Forty-two percent of firms surveyed said that recruiting staff was a serious problem, but retaining employees isn’t. That’s likely because 90 percent of respondents said that they had taken at least one measure to keep their talent on board, with 49 percent saying they had bumped up salaries and 45 percent of firms adding remote options or shortened work weeks.
As the AIA noted, the end of the year always represents a softer market thanks to the holidays, cold weather, and award season preparation, so we may see things picking up once the January figures are released.