ABI February 2018: Billings growth at firms slows modestly
Technological innovations expected to most impact AEC industry over the next decade include offsite construction processes, virtual and augmented reality, and enhanced construction materials
With an Architecture Billings Index (ABI) score of 52.0 in February, business conditions at architecture firms remained strong for the month, although billings grew at a modestly slower pace than in January (any score over 50 indicates an increase in architecture firm billings). Firm billings have now increased for the last five consecutive months and 11 months out of the last year. Inquiries into new projects and the value of new signed design contracts both increased in February, as firms remain generally optimistic about future work in the pipeline.
Business conditions remained strong at architecture firms located in all regions of the country except the Northeast in February, with firms located in West reporting the strongest conditions for that region in more than a decade. Firms located in the Northeast, on the other hand, saw their billings decline for the third consecutive month. Architecture firm billings increased at firms of all specializations in February; firms with a residential specialization continuing to report the strongest growth, as they have for the last five months.
The general economy continued to show positive signs in February. The latest edition of the Federal Reserve’s Beige Book report, released on March 7, found that economic activity across the country continued to expand in late January and February. Some districts reported that they have started to see an increase in steel prices, while others reported an increase in the cost of lumber due to increasing construction activity, although these conditions are not widespread across the country at this time. Commercial real estate growth was reported in the Atlanta district, and the San Francisco district continued to experience strong growth in both commercial and residential real estate. Commercial construction growth was strong in the Minneapolis district but residential construction was more mixed, and home sales declined.
In addition, robust employment numbers were reported in February, as total nonfarm payroll employment grew by 313,000 new positions, for an average increase of 242,000 a month over the last three months. Construction employment was one of the major contributing sectors to the increase in February, adding 61,000 new positions for a total of 185,000 over the last four months. And architectural services employment grew by 1,000 positions in January, the most recent data available, to a total of 194,000 positions nationwide.
Tech trends in AEC
This month’s special practice questions asked responding firm leaders about the significance of emerging technological trends in the AEC industry over the coming year, as well as over the next five to ten years. The largest share of respondents (76 percent) indicated that they think that virtual/augmented reality/real-time rendering (to better visualize, test, and validate designs) will be somewhat or very significant over the coming year, while 95 percent indicated that it will be somewhat or very significant over the next decade.
In addition, 73 percent of respondents indicated that the internet of things (sensors or data used to control systems and/or collect data) will be somewhat or very significant over the coming year (94 percent over the next decade) and 64 percent believe that enhanced construction materials (e.g., specially cured concrete; smart fenestration; microbiology; nanotechnology developments) will be somewhat or very significant over the coming year (91 percent over the next decade). The largest difference between current and future significance was for artificial intelligence/machine learning (used to generate best practices, prototypes), where just 29 percent think that it will be significant in the next year, but 79 percent think that it will be significant over the next decade.
When asked to select the top three trends that they think will have the greatest impact on the AEC industry over the next five to ten years, the largest share of respondents (56 percent) selected offsite construction processes (e.g., prefabrication; modularization; preassembly; offsite multitrade fabrication), followed by 51 percent that selected virtual/augmented reality/real-time rendering, and 45 percent that selected enhanced construction materials. Fewer than 20 percent of respondents think that autonomous vehicles (affecting building designs; use of space; locational choices of development) or artificial intelligence/machine learning will have a major impact on the AEC industry in the next decade.
This month, Work-on-the-Boards participants are saying:
- "General contractors in the area are beginning to receive notices of price increases in concrete and steel, cost escalation across the board. We are also seeing labor shortages in the construction and architectural industries." —14-person firm in the South, institutional specialization
- "Big projects are getting all the attention, while smaller, routine projects are struggling for funding and approvals." —14-person firm in the Northeast, commercial/industrial specialization
- "Project prices are going up, since all subcontractors are busy. Trades can choose projects to work on in our market." —8-person firm in the Midwest, mixed specialization
- "Business conditions remain strong; new design work is consistently coming out of our public agencies and private development does not seem to have slowed at all. The availability of skilled craftsmen is beginning to impact the construction phase of our projects negatively through delays to the overall schedule and a dip in the quality of the work." —6-person firm in the West, institutional specialization