Two architecture teachers discuss a student's final ject work.Erdark | E+ | Getty ImagesA version of this article first appeared in the CNBC perty Play with Diana Olick.
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to receive future editions, straight to your inbox.Architecture firms are reporting a drop in billings as concerns the broader economy and tariffs impact commercial real estate development and spending.The AIA/Deltek Architecture Billings Index (ABI) remained in negative territory in June with a score of 46.8, down from 47.2 in May.
Anything below 50 is considered negative sentiment.
" conditions were soft nationwide in June, with a slight billing increase in the South for the first time since October," said Kermit Baker, chief economist at AIA, the American Institute of Architects.
"Other regions saw declining billings, though at a slower pace. While all specializations experienced softer billings, the decline slowed for commercial/industrial and institutional firms.
Multifamily firms faced the weakest conditions, with further declines."Get perty Play directly to your inboxCNBC's perty Play with Diana Olick covers new and evolving opportunities for the real estate investor, dered weekly to your inbox.
here to get access today.One bright spot was inquiries into new jects, which increased for the second consecutive month and grew at the strongest pace since last fall with a score of 53.6.
This suggests that clients are starting to send out requests for posals and will start working with architecture firms on potential jects.
AIA notes that these inquiries do not necessarily translate into actual jects. The value of newly signed design contracts also fell for the 16th straight month.
Billings are not ly to imve until the value of these new design contracts also sees gains.
The AIA also put out its midyear forecast:First the good news: In spite of stubbornly high long-term interest rates, inflation rates stalled above the Federal Reserve Board's target, falling consumer confidence scores, disappointing levels of building activity, rising tariff rates for many inputs to construction, and construction labor shortages exacerbated by restrictive immigration policies, the outlook for the remainder of the year and into 2026 is largely unchanged from where it was at in the beginning of the year.
The bad news: The outlook for spending entering the year was very pessimistic.
The AIA forecasts that overall spending on nonresidential buildings, not adjusted for inflation, will increase only 1.7% this year and grow very modestly to just 2% next year.
Spending on the construction of manufacturing facilities, which had been a bright spot in recent years, is now expected to decline 2% this year, with an additional drop of 2.6% next year.
Institutional facilities are expected to be the strongest sector with jected gains of 6.1% this year and another 3.8% in 2026.In addition to a slowing economy, un and constantly changing tariff policy is creating growing uncertainty in the architect, engineer and construction services industry.
"Not knowing what ducts will cost in the future, whether they will be available, how these changes might affect their supply chain, and whether they will voke a trade war with the exporting countries are all questions that the AEC industry is asking before ceeding with planned jects," according to the report.
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