Architectural Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 21,000 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.

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.

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.

Industry size & Structure

The average architectural firm has about 9 employees and generates $2 million in annual revenue.

    • 83% of firms have nine or fewer 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 has 21,000 firms with $43 billion in annual revenue and 190,900 employees.
    • Non-residential services represent about 85% of firm revenue.
    • Large firms in the US include HOK, William Rawn Associates, and Skidmore, Owings and Merrill (SOM).
                              Industry Forecast
                              Architectural Services Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 12, 2022 - Architectural Billings Rise
                              • Demand for building design services is strong, according to an April report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI), an indicator of future building construction demand, was 58 in March, up from 51.3 in February. Any reading above 50 indicates growth in architectural billings. The rise in billings is likely due to an effort to lock in interest rates ahead of continued rate hikes in the coming months. The ABI reading for commercial/industrial projects was 55.3 in March. On a regional basis, the South registered the strongest March ABI score with 57.2, followed by the Midwest (56.2), the West (54), and the Northeast (46.3).
                              • The Dodge Momentum Index increased 6% in April 2022 to 164.8 (2000=100), up from the revised March reading of 155. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. The commercial planning component increased by 9%, and institutional planning rose by 2%. The commercial planning pipeline was robust due to data center, warehouse, and hotel projects. While the backlog of nonresidential building projects is strong and should remain solid in the coming months, rising interest rates and higher materials costs could moderate construction activity through 2022.
                              • Total construction spending increased 0.1% in value month over month on an adjusted basis and 11.8% in value year over year on an unadjusted basis in March 2022, according to the US Census Bureau. Residential construction spending increased 1% month over month and 17.8% year over year in March. Nonresidential construction spending declined 0.8% month over month and increased 5.8% year over year in March.
                              • Shifting population patterns that were trending before the pandemic gained steam during the health crisis, which could affect future demand trends for architectural services. More than two-thirds of large urban counties saw their populations shrink in 2021, according to the analysis of US government data by the Economic Innovation Group (EIG). This change is thought to have in part been caused by the large increase in working from home and a decline in immigration. About 80% of exurban communities (populations under 50,000 with at least 25% of the population in a large or medium-sized suburb and within a large metro area of 500,000 or more) gained in population in 2021. While exurban and rural areas saw strong growth, the number of suburbs that grew in 2021 declined.
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