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 21,100 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 10 employees and generates $2.4 million in annual revenue.
- The industry has 21,100 firms with $51.4 billion in annual revenue and 206,200 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
Nov 26, 2024 - Multifamily Developer Sentiment Mixed
- Multifamily developers’ confidence was mixed in the third quarter of 2024, according to the National Association of Home Builders (NAHB) latest Multifamily Market Survey. The Multifamily Production Index (MPI) rose two points in Q3 2024 to 40 compared to the third quarter of 2023. The Multifamily Occupancy Index decreased by seven points to 75 over the same period. An MPI or MOI reading of 50 or more indicates that multifamily production or occupancy, respectively, is growing. Multifamily developers’ headwinds include a tight lending environment, higher borrowing costs, regulations, and land availability. The NAHB forecasts that multifamily construction activity will remain weak for about another year amid a significant volume of projects under construction. Multifamily construction is expected to return to more robust growth near the end of 2025.
- Demand for building design services improved in October 2024 after 20 straight months of declines, according to a November report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) was 50.3 in October. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries rose to 54.1 in October compared to 51.6 in September, but the index for new design contracts decreased from 48.3 to 45.3. The AIA’s Chief Economist, Kermit Baker said, “Billings finally stabilized this month, and firms are feeling more optimistic about revenue projections for 2025. Overall, 41% of responding firm leaders expect to see net revenue growth from 2024 to 2025, with 32% projecting growth in the 5% to 9% range.”
- North American construction and engineering spending growth is expected to slow to 2% in 2025 after growing an estimated 5% in 2024, according to FMI’s fourth-quarter 2024 North American Engineering and Construction Outlook. Growth in nonresidential building construction will be led by public safety (up 6% in 2025), manufacturing (5%), amusement and recreation (4%), transportation (4%), and communication (4%). Commercial construction spending is expected to decline 8% in 2025 amid weaker demand for warehousing space. Lodging construction spending is forecast to drop 8%, and stubbornly high office vacancies will continue to weigh on new office construction, which is projected to rise 1% in 2025. A recent jump in new apartment supply is expected to reduce multifamily spending by 16% in 2025.
- The missing-middle segment of the US multifamily housing construction market saw its biggest gain in 17 years in the third quarter of 2024, according to The National Association of Home Builders (NAHB). The missing middle, which consists of housing properties with 2-4 units, has been weak since the Great Recession. However, in the third quarter, there were 6,000 construction starts for projects with 2-4 units, more than double the amount in Q3 2023. The missing middle’s share of overall multifamily construction was just over 6% in Q3 2024, down considerably from about 11% that was typical between 2000 and 2010. While the NAHB notes that missing middle developments are likely to continue lagging absent zoning reforms, the recent increase is encouraging.
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