Optimism Wanes as 2023 Approaches

Optimism throughout the architectural industry wanes as the calendar turns to 2023, the American Institute of Architects (AIA) reports. The AIA reached out to architectural firm leaders regarding revenue growth, and only 36% of leaders expect revenues to increase in 2023.

Firms expect revenues to increase by just 0.8% in 2023. This is in contrast to substantial revenue growths in 2022 for a majority of firms. Of the firms surveyed, 59% indicated that revenue increased this year compared to 2021. The average growth rate was 6.8%, says the AIA.

Large firms reported the highest growth rate, at an average of 10.9%. And even though most firms have seen revenue growth this year, one in five firms (21%) indicated that they have experienced a decline. Additionally, 28% of firms indicated that their current revenue estimates for 2022 now, as compared to the beginning of the year, are less than expected.

However, one-third of firms indicated that their revenue has exceeded expectations for the year, while 39% reported that revenue is currently in line with their expectations for the year.

At firms expecting a decrease in revenue in 2023, nearly half (44%) indicated that client nervousness was likely to be the major impediment to revenue. This is followed by high costs for materials and labor for construction projects (19%), rising interest rates (14%) and lack of staff/limited ability of the firm to take on new projects (9%).

Nearly a majority of firms that expect an increase in revenue next year say that the high level of backlogs entering 2023 is the one factor that could have the biggest impact on revenue growth. This is followed by strong employment and population growth in their area (18%), and funding from federal programs like the Infrastructure Investment and Jobs Act, CHIPS and Science Act and the Inflation Reduction Act.

In addition, more than one-quarter of firms indicated that another factor would likely have the largest impact on their revenue in 2023: a robust client base.

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