2007 COMPONENT SURVEY OF BUSINESS CONDITIONS
Business Conditions at AIA Regions Strong, but Show Signs of Slowing
Residential weakness adds to softening; institutional healthy in most regions

by Jennifer Riskus
AIA Research Specialist

Summary: AIA component leaders report that business conditions remain relatively strong in their regions in 2007, despite some economic upheaval. Many components also rated conditions as similar to last year, which tends to mean that regions that were strong last year remain strong, while those that were weak continue to struggle. Demand for architects of all skill levels remains high, and regions that are prospering have greater need for new hires. Component leaders report a fairly large decline in business conditions in the residential sector, but the commercial/industrial and institutional sectors remain solid.

Business conditions in 2007 remain relatively healthy across the country, with business conditions in all regions rated a 7.2 on a 10 point scale (with 1 being “terrible” and 10 being “couldn’t be better”). The best business conditions currently can be found in the southwestern parts of the country (Western Mountain and Texas regions) and in the Middle Atlantic region. The only region where component leaders rated current conditions below a 5 (“so-so”) was Michigan, which is in the midst on an ongoing manufacturing slowdown. Weakness also was reported by component leaders in the Florida/Caribbean and Ohio Valley regions.

Many components report weaker conditions
Despite a national rating of 5.8 (just above “about the same” on a scale of 1 to 10, with 1 being “much worse” and 10 being “much better”) when comparing current business conditions to those of a year ago, many components are reporting weaker business conditions in their regions. Three regions (Michigan, Florida/Caribbean, and New York) rated business conditions this year compared to last year as less than 5, and ratings of less than 6 can be found in 7 additional regions. Weakness is more widespread this year than last, where it was primarily limited to the industrial Midwest. Now, patches of weakness can be found in all corners of the country, from California to New England to Florida/Caribbean. In fact, most of the regions with component leaders reporting that conditions are better this year than last can be found in the agricultural Midwest and South (Central States, Texas, and Gulf States regions).

Demand for architects remains steady
National demand for architects remains in line with where it was in 2006. Component leaders report that experienced architects, defined as those with 8-10 years of experience, remain in highest demand, followed by moderately experienced architects (3-6 years of experience), managers/senior managers, and interns. Demand varies by region of the country and closely follows the trend of overall business conditions in that region. Regions where business conditions are slumping have little need for additional architects, while regions such as Western Mountain, where business conditions are very strong, have a high demand for nearly all positions.

Components report that managers are in highest demand in western regions (Western Mountain and California) and Pennsylvania, but experienced architects remain the position most in demand nationwide, particularly in the Middle Atlantic, Pennsylvania, and Western Mountain regions. Moderately experienced architects are currently needed in nearly all regions of the country, and components report less of a demand for interns at the moment, with most regions indicating only some need.

Commercial, institutional stand strong
When asked to rate business conditions by sector, component leaders reported that the commercial/industrial and institutional sectors remain strong, while the residential sector score fell below 3, “moderate.” In fact, the downturn in the residential market is so widespread that only one region, the Middle Atlantic, reported a score of 4 (“strong”) for residential business conditions.

In contrast to the residential slowdown, the nonresidential sector has remained strong, in particular the institutional sector, where four components reported scores of 4 or higher. Regions with strong overall business conditions, such as Central States and Western Mountain, reported the highest commercial/industrial scores this year. Notwithstanding overall business conditions slightly above average, component leaders in the Florida/Caribbean region are seeing widespread weakness in all three sectors, while Texas is reporting strength in all three sectors, to match its overall strong business conditions.