Architecture firms reported a sharp drop in business in September, indicating that the commercial real estate market could experience even more pain in the next year.
The AIA/Deltek Architecture Billings Index dropped to 44.8 in September, the lowest score since December 2020, during the height of the Covid-19 pandemic. Any score below 50 indicates worsening business conditions. The score shows a growing number of architecture firms are reporting a drop in billings.
The index is a forward-looking indicator of demand for nonresidential construction activity — both commercial and industrial buildings. It aims to predict construction activity nine to 12 months out.
“While more firms are reporting a decrease in billings, the report also shows the hesitance among clients to commit to new projects with a slump in newly signed design contracts,” said Kermit Baker, AIA’s chief economist. “As a result, backlogs at architecture firms fell to 6.5 months on average in the third quarter, their lowest level since the fourth quarter of 2021.”