by Jennifer Riskus
Research Specialist

Summary: Business conditions at architecture firms held steady in April, with all regions except the Northeast showing continued growth. Strongest growth by sector is found in firms with a commercial/industrial and institutional specialization. Almost three quarters of survey respondents recently worked on green/sustainable projects, and their clients’ decision to incorporate those features is mostly motivated by cost savings over the life cycle of the building.

Business conditions at architecture firms remained stable in April, with the AIA Architecture Billings index (ABI) score of 52.7. The ABI has remained relatively unchanged for the last three months, but since any score above 50 indicates revenue growth, there is no cause for concern. In fact, it still seems likely that strong billings will continue for the foreseeable future. Inquiries for new projects have also remained positive for the last several months. Most firms are reporting that they are still very busy, which also bodes well for the summer months ahead.

Regionally, conditions in the Northeast continue to moderate after their spike earlier in the year. Firms in the Northeast reported a slight decline in billings in April, the first in more than three years. The late arrival of winter, followed by a delayed start of spring, may be partially to blame for this. The other three regions have all been fairly stable for the first four months of the year, with scores in the low 50s showing steady growth. Growth in the South has been sustained the longest, with no decline in billings reported for nearly five years.

Firms that specialize in the commercial/industrial and institutional sectors showed the strongest growth in April. The firms in our panel with a residential focus continue to see some degree of growth after declining for much of the past year, but there is still no definitive sign of a residential rebound on the horizon.

Broader economy still weak
In terms of the broader economy, employment growth remains weak, with an average of only 129,000 jobs added each month so far in 2007, compared to 189,000 on average through the first four months of 2006. Construction employment shed 11,000 jobs in April, but employment in this sector remains relatively stable so far this year. GDP, the broadest measure of the economy’s health, also reflected a slowing pace of growth, with the preliminary first-quarter release indicating growth of just 1.3 percent (when adjusted for inflation and annualized), compared to 2.5 percent growth for the fourth quarter of 2006. And the Conference Board’s Consumer Confidence Index fell for the second month in a row in April, reaching its lowest score since last August, as rising gas prices remain a major concern for consumers.

Cost savings a top green motivator
Issues of green design and sustainability have been increasing in importance fairly recently, as evidenced by the theme of the AIA 2007 National Convention, “Growing Beyond Green.” This month’s special question asked our panel members whether they have worked on green/sustainable projects recently and, if so, what factor they considered most motivating by the client when considering the addition of green/sustainable elements to a project. Almost three quarters of respondents, 72 percent, indicated that they have worked on such projects in the last two years.

Of that group, nearly half (41 percent) considered costs savings over the lifecycle of the building to be the most motivating factor when considering the addition of green/sustainable elements to a project, followed by one fifth who indicated that conservation of scarce resources was the most important consideration, and 13 percent who indicated the improved marketability of the finished project.