Billings at U.S. architecture firms declined again in August, and the share of firm leaders who expect business to improve in the fourth quarter has fallen to one in four, the lowest of the three readings the American Institute of Architects has taken since it began asking the question this year.
The AIA/Deltek Architecture Billings Index registered 47.2 for August in results published Sept. 23. Any score below 50 means more firms reported falling billings than rising ones. Slightly fewer firms reported a decline than in July, though AIA said the majority continued to see weak business conditions.
Architects sit at the front of the construction pipeline, which is why the index is watched outside the profession: AIA describes the ABI as a leading indicator that runs roughly nine to 12 months ahead of nonresidential construction activity. What firms are drawing now is what gets built, or does not get built, late next year.
On that measure the near-term signal is mixed and the forward one is not. Inquiries about new projects grew only modestly in August, while the value of newly signed design contracts β the work that actually converts into billings β continued to fall.
Expectations are sliding faster than billings
The sharper deterioration is in what firm leaders think comes next. AIA began asking respondents about the quarter ahead at the end of the first quarter, when 31% expected billings to increase in the second quarter. That held at 30% for the third quarter. For the fourth quarter it dropped to 25%.
The pessimistic side moved further. The share expecting billings to decline in the coming quarter rose from 21% at the end of the first quarter to 29% at the end of the third.
Conditions split by geography. Firms in the Midwest reported modest growth for the first time in nearly a year, and billings in the West were essentially flat. Firms in the Northeast weakened sharply, to their lowest level since 2020. Regional and sector readings are three-month moving averages, so they move more slowly than the national number.
By specialization, firms doing commercial and industrial work saw a slight uptick β consistent with the data center and industrial building that has propped up nonresidential construction elsewhere, and with the one in six contractors now reporting data center work. Firms in every other specialization stayed soft, including the institutional and multifamily residential practices that had posted slight growth earlier this year.
Crosswinds in the wider economy
AIA’s own read of the backdrop is that conditions are pulling in opposite directions. Payrolls grew more than expected in August, adding 162,000 jobs, and construction added 22,000 of them. Architectural services employment rose by 700 positions in July, the most recent month available.
Inflation moved the other way. The Consumer Price Index rose 0.4% in August after a 0.1% increase the month before, leaving it 3.4% higher than a year earlier, with energy a large contributor: gasoline prices rose 3.9% in the month and are up 27.4% over the year.
The combination produced the outcome that now sits over every project pro forma. The Federal Open Market Committee raised its benchmark rate a quarter point on Sept. 16, to a target range of 3.75% to 4%, saying the move “will support a timelier return to the Committee’s 2 percent goal.” AIA noted it was the first increase in three years.
Nearly half of firms are working with AI β and few are training for it
August’s survey added special questions on artificial intelligence, and the answers describe an industry that has adopted the tools well ahead of any structure around them.
Forty-eight percent of firm leaders said their firm is currently engaging with AI: 18% called it a strategic priority and 30% said the firm is actively using it. Another 34% described their approach as interested but reactive, and 15% as passive or cautious. Size separates the field β among firms billing more than $5 million a year, 30% call AI a strategic priority.
Training has not kept pace. Just 7% of firms have a formal AI training program, and 26% provide training on individual request. Even at large firms, only 12% have a formal program, though 43% train on demand.
The productivity returns are modest so far. Among firms using AI, 22% said it has substantially increased productivity, 2% said it decreased productivity, and 76% said productivity was about the same.
Budgets tell the same story of informal adoption: 15% of firms have money specifically allocated to AI this year, 47% buy AI and emerging technology out of other budget lines, and 38% do not invest at all. Among firms billing more than $5 million, 30% have a dedicated AI budget, against 9% of firms billing $1 million to $5 million and 1% of firms under $1 million.
That is set to shift. Two-thirds of firms expect to spend more on AI in 2027 β rising to 84% among those that already have a dedicated budget, and still 41% among firms that do not currently invest in it at all.
