AIA/Deltek reports that the billings figure for March is the 14th-consecutive monthly downturn for architecture firms. AIA/Deltek traces the results to continued inflation, “supply chain issues and other economic challenges."

Kermit Baker, AIA chief economist, said in a statement, "Elevated construction costs coupled with prolonged high interest rates continue to discourage new project activity.”

But AIA also said that design work in the institutional sector “seems to have stabilized, providing a solid base for the profession as it awaits a more positive economic environment for construction.” 

The dip in billings occurred in all regions and among firms that focus on all types of market sectors. The softest results among regions were reported by for firms located in the Midwest and the South.

Among market sectors, billings dropped at a faster rate for firms that specialize in the commercial/industrial category 

In one positive note, the AIA and Deltek say inquiries into new projects continued to increase in the period surveyed, but the increase has come at a slower rate than in 2021 and 2022.

The report's authors also say the value of new signed design contracts was flat in March, which has generally been the trend for the past 18 months.

They say, “This shows that clients are interested in starting new projects but remain hesitant to sign a contract and officially commit to those projects."

Looking ahead, most firms say their project backlogs average a strong 6.6 months, so, the authors said, “Even with the ongoing soft patch, they still have work in the pipeline."

According to the authors, “Despite recent declines, inflation remained pervasive in March, with the Consumer Price Index rising by 0.4% from February’s level and up 3.5% year over year."

They note that while inflation is down significantly from the record highs of 2022, it is still “more elevated than had been expected by this point in the cycle.”

Each month, the index also asks a question about various topics dealing with the practice of architecture. For March, the index looked at the questions related to profitability, including the relative profitability of architecture work for various types of clients. It also asked about various types of design fees.

Of the firms responding, 46% said negotiating design fees is more challenging than it was four to five years ago.

Leaders of responding firms reported that, as a fee-determination method, they were most likely to use an hourly rate (with or without an agreed maximum) and a stipulated sum, or fixed fee.

Regarding profitability, responding firms said that among client categories, architectural work for corporate/business, commercial or industrial clients tends to be the most profitable, followed by private institutions, such as for-profit hospitals and private schools.

Of firms reporting, 44% said projects for clients that are nonprofit organizations or institutions (such as nonprofit schools and hospitals, museums and churches) “are not very profitable.” And 45% reported that work for such clients’ work was “somewhat profitable.”