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

                              Jun 14, 2022 - Architectural Billings Rise
                              • Demand for building design services is strong, according to a May report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI), an indicator of future building construction demand, was 56.5 in April, slightly dropping from 58 in February. Any reading above 50 indicates growth in architectural billings. The AIA noted that reconstruction billings exceeded new construction for the first time in 20 years in April. The AIA expects reconstruction’s share of architectural billings to continue. All major sectors showed billings growth in April, including mixed practice (ABI reading of 61.2), commercial/industrial (60.7), multi-family residential (57.2), and institutional (51.8). On a regional basis, the West registered the most robust March ABI score with 58.2, followed by the Midwest (57.6), the South (57.3), and the Northeast (53.1).
                              • Higher interest rates are showing signs of cooling the commercial real estate market, according to The Wall Street Journal. After 13 consecutive months of growth, the value of commercial property deals fell 16% in April to $39.4 billion compared to a year earlier, according to MSCI Real Assets. Throughout 2001 and the first quarter of 2022, multifamily and industrial property deal activity was robust, offsetting the weaker office market, which has been under pressure due to remote work. Industry watchers suggest the commercial property market may be slowing as investors are wary of making offers amid rising interest rates. Concerns about an economic slowdown could also be reducing deal activity as potential buyers may anticipate lower rent for offices, retail, and multifamily housing. A dip in demand for existing commercial properties could hinder investments in new commercial construction.
                              • The Dodge Momentum Index increased 7% in May 2022 to 176.2 (2000=100), up from the revised April reading of 165.2. 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 6%, and institutional planning rose by 9%. The commercial planning pipeline was robust due to increased office and hotel projects. Institutional growth was driven by higher education and healthcare planning. Despite higher interest rates and recession concerns, nonresidential building projects continue to enter the planning pipeline.
                              • Total construction spending increased 0.2% in value month over month on an adjusted basis and 12% in value year over year on an unadjusted basis in April 2022, according to the US Census Bureau. Residential construction spending increased 0.9% month over month and 18.8% year over year in April. Nonresidential construction spending declined 0.4% month over month and increased 5.8% year over year in April.
                              • Homebuilder sentiment, as measured by the National Association of Home Builders/Wells Fargo Housing Market Index, decreased to 69 in May 2022 from 77 in April, marking the fifth consecutive monthly decline. Higher materials costs and rapidly rising interest rates are making housing less affordable, weighing on builder confidence. NAHB Chief Economist Robert Dietz said, “Building material costs are up 19% from a year ago, in less than three months, mortgage rates have surged to a 12-year high, and based on current affordability conditions, less than 50% of new and existing home sales are affordable for a typical family.”
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