Architects report reduced demand, expected revenue loss and signs of future slowing of starts

Dive Brief:

A new American Institute of Architects report indicates that the coronavirus pandemic has reduced the demand for construction design services, with 50% of architecture firms surveyed reporting fewer design projects than expected for March as of March 23 and 59% responding that they had fewer inquiries for new projects.
Of the architecture firms surveyed, 83% said they expect a decline in revenue in March and 94% said they anticipate a revenue drop in April. Meanwhile, 17% said many potential projects were stopped or moving more slowly and 50% said some projects had stopped or slowed. Only 33% reported that prospective projects were moving along as expected.
As far as the impact of COVID-19 on day-to-day operations, 79% of firms responded that they are limiting in-person meetings with clients; 48% said most of their staffs are working remotely; 47% said they had limited business travel; and 6% said they were operating with no changes.

Dive Insight:

The demand for design services is considered a leading indicator of future construction activity. It was just March 18 when the AIA reported an increase in demand for design services for February billings. A score on AIA's Architecture Billing Index higher than 50 represents an increase, and the latest report marked the sixth consecutive increase, with a 53.4 score. The same increase was also reflected in new inquiries and contacts, but the AIA acknowledged that these results did not represent the full impact of the coronavirus due to the timing of the ABI survey.

Construction firms are already feeling the impact of the pandemic, with almost 40% of contractors reporting that owners have either stopped or delayed projects, according to the Associated General Contractors of America. Cancellations and stalling of projects are in stark contrast to the results of the association's February report that showed that contractors in 42 states had added workers. Still, in AGC's survey conducted March 23 through 26, only 18% of contractors reported that projects were subject to mandatory government shutdowns.

The AGC also found that:

45% of the contractors surveyed had project delays or disruptions.
23% reported shortages of material, parts equipment and personal protective equipment like respirators.
18% had experienced a craft worker shortage.
16% had projects delayed by a lack of government workers needed for permits and inspections.
13% reported the presence of a potentially infected person on the jobsite had disrupted operations.

Nevertheless, the AGC reached a goal in establishing guidelines about the industry's role amid shutdowns when the Department of Homeland Security clarified that construction workers were essential to keeping critical infrastructure viable and operational during the crisis. In response to the DHS statement, AGC CEO Stephen Sandherr said the new guidance "should help eliminate the confusion and ambiguity that has led several state and local officials to needlessly order halts to construction activity that is clearly essential."