by Kermit Baker, PhD, Hon. AIA
Chief Economist

U.S. architecture firms reported another strong upturn in business conditions in February, coming on top of a surprisingly strong January. Fully a third of firms indicated that February billings exceeded January levels by 5 percent or more, while only 14 percent noted a decline. Larger firms were particularly enthusiastic about business conditions, with a third reporting gains and only 4 percent indicating declines.

Commercial/industrial architecture firms reported the sharpest gains in billings. These firms also indicated strong growth in inquiries for new projects, so the recent upturn is likely to be sustained over the next several months in these construction sectors. The upturn in design activity has been felt by firms in all regions of the country. Firms in the South report the strongest growth in billings, as well as in inquiries for new work, followed closely by firms in the Northeast.

National economy improving
The national economy continues to show improvement. Particularly noteworthy is the recent report on housing construction. Housing starts totaled almost 2.2 million units in February when seasonally adjusted and annualized, which is the strongest housing construction number since 1978. Housing, though a key driver of the economy in recent years, isn’t the only sector breezing along at present. Consumer spending remains strong, as retail sales are growing at a 5.5 percent pace through the first two months of the year.

Economy moving the right way
Payrolls increased nationally by 262,000 in February, a pace that would generate more than three million new jobs this year. Construction played a strong role in this gain, with this sector adding a net 30,000 jobs during the month. Further improvement in the economy seems likely, as the leading economic index developed by the Economic Cycle Research Institute advanced nicely in February and has increased three of the past four months.

Though popular, design-build has some detractors
In recent years, design-build projects have grown in popularity for many building categories. Well over half (57 percent) of the AIA Work-on-the-Boards panel members report that their firms have worked on a least one design-build project over the past two years. Two thirds of our panel members feel that design-build projects will account for a larger share of total construction activity 10 years from now than they do today. However, only a quarter of firms in this panel agree with the statement that design-build represents a superior project-delivery method from the architect’s perspective; 42 percent disagree with that statement, and 33 percent are neutral.

A majority of firms feel that design-build projects have a shorter design and construction time and an increased likelihood that projects will be completed within budget, and almost half feel that these projects generally have fewer change orders. At the other extreme, few members of our panel feel that that the design-build process generally produced lower bids or generates fewer problems in the design phase. A common comment by panelists was that although design-build offers some advantages relative to traditional design/bid/build, many of them accrue to the contractor rather than the architect.

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