Architectural Services
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 20,800 architectural services firms in the US are responsible for designing places for people to live, work, worship, learn and play. 83% of firms have nine or fewer employees. Most firms gain a significant portion of their revenue (about 81% on average) from non-residential services.
Technology Levels the Playing Field
Building Information Modeling, or BIM, has become the industry standard for projects of all sizes, because it facilitates the communication of design and construction plans across all project participants.
Green Building Supports New Development
The government has helped fuel the green building surge by providing a variety of incentives for firms and contractors who build with energy efficiency and use renewable energy.
Industry size & Structure
The average architectural firm has about 9 employees and generates $2 million in annual revenue.
- The industry has 21,000 firms with $43 billion in annual revenue and 190,900 employees.
- Sole employee firms tend to work from home-based offices in order to defray overhead expenses. Most other small to medium firms work from leased office space.
- The industry is highly fragmented with the 50 largest firms representing just 19% of industry revenue.
- Large firms in the US include HOK, William Rawn Associates, and Skidmore, Owings and Merrill (SOM).
Industry Forecast
Architectural Services Industry Growth
Recent Developments
Apr 26, 2024 - Industry Growth Moderates
- The architectural services industry’s sales are expected to soften over the next several years. The industry’s year-over-year sales rose 14.3% in 2022 before moderating to 5.8% growth in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales are projected to rise a modest 2.6% in 2024 and 3.9% in 2025, then see average annual growth of about 4.3% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- Contractors have cooled on starting new industrial construction projects after a period of red-hot demand during the pandemic, according to Globe St. Nearly 1.2 billion square feet of industrial space was added over the past two years, according to CBRE. The health crisis drove up demand for warehousing and logistics space amid the boom in ecommerce, but high interest rates, weaker demand, and overcapacity have slowed industrial construction starts. According to CBRE, in the fourth quarter of 2023, industrial starts fell to 46.3 million square feet compared to a quarterly average of 102.5 million square feet in 2022. However, CBRE believes industrial starts will bounce back once the fresh round of new supply is absorbed and additional space is needed as demand increases.
- The total value of nonresidential building construction starts decreased a seasonally adjusted 9% in March from February, according to Dodge Construction Network. The drop was led by a 58% decrease in manufacturing projects. Commercial construction starts were off by 1% in March amid fewer office and hotel starts. Institutional projects saw a 4% gain as several large healthcare projects got underway. Dodge Construction Network chief economist Richard Branch said, “The construction sector has hit a soft patch to start 2024. However, this should not be overly surprising given high rates and restrictive credit.” Branch continued, “The recent hot inflation readings likely mean that rate cuts won’t happen until later in the year, and as a result, the commercial and multifamily sectors will continue to languish.”
- Apartment buildings are getting taller amid sustained demand for rentals, scarcity of land, and some cities’ willingness to change zoning rules to attract development, according to The Wall Street Journal. Between 2021 and 2023, US cities added more than 2,900 buildings with more than 200 units, a 17% increase of the number built between 2018 and 2020, according to property data firm Yardi. High interest rates and single-family home prices continue to prop up demand for rentals, even among those with relatively high incomes. Some cities are easing some zoning rules, such as minimums for parking. The economics of multifamily development have also changed. Higher construction costs mean buildings need to have more units to be profitable.
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