One month after the December 2021 Architecture Billings Index (ABI) report pointed to a shaky, uncertain future, the figures released today by the American Institute of Architects (AIA) for January 2022 only furthers that uncertainty. The ABI rose, but demand continued to decline in some regions and worries over staffing could continue to put a damper on growth this year.
In January, the ABI came in at 51.0 (anything over 50 for the composite index represents an increase from the month before, anything under a decrease), compared to the 51.0 in December of 2021. The December figure was initially measured at 52.0, but the AIA annually readjusts its end-of-the-year figures the following January to take seasonal factors into account.
“Architecture billings, while remaining at very healthy levels in recent months, have slowed considerably from the middle of last year,” said AIA Chief Economist, Kermit Baker, in the announcement. “This no doubt reflects delays in the construction sector caused by supply challenges for both labor and materials, as well as ongoing staffing constraints at architecture firms.”
Despite the mixed signals and only tepid positive momentum, both the measure of inquiries into new projects (61.9 in January versus a stronger 66.8 in December) and newly signed design contracts (53.1 in January, a slight dip from the 55.8 seen in December) remained strong. This indicates that the will to build is there, but developers and homeowners are continuing to hedge their bets.
There are myriad factors at play, from a concrete strike on the West Coast, to soaring timber prices, to continued staffing woes across the architecture and construction industries.
And this recovery, as mentioned, isn’t spread equally. On a region-by-region basis, the Northeast saw a decline for the fifth month in a row, coming in at 46.8 in January from a previously negative 45.3 the month before. The same story played out in the West, falling to 47.6 in January from the 47.5 measured in January. Demand in the South, however, continued to grow at a blazing pace of 61.2 in January, up from 56.4 the month prior, while the Midwest remained tepid at only 51.5 in January, only a smidge greater than the 51.0 seen in December.
On a sector-by-sector basis, things were equally as mixed. Mixed-practice firms with a variety of projects under their belts fared best, with billings measured at 59.3 in January, up again from 60.6. Firms specializing in either commercial or industrial work saw billings rise after trending negatively in December, up to 54.2 from 49.2. Meanwhile, firms specializing in institutional work continued to suffer, as they saw billings decline further in January to 47.3 from 47.6 in December. Finally, firms specializing in multi-family residential projects, despite the boom in housing starts, only saw billings “rise” to 50.1 in January, from 49.2 in January.
All of this points to a cooling off—newly signed design contracts, inquiries, and billings have been positive since February of 2021, but the slope is gradually tapering off as enthusiasm hits real-world conditions. Firms are expected to raise compensation this year to help attract and retain talent, but it’s unclear if this will help untangle the months-long work backlog many are currently facing.