Architecture firms across the United States continued to experience challenging business conditions in October 2025, with the Architecture Billings Index (ABI) registering 47.6 for the month. While this represents an improvement from September's score of 43.3, indicating fewer firms reported declining billings, the figure still falls below the 50-point threshold that separates growth from decline. The mixed signals come as firms reported a significant increase in inquiries for new projects—the largest share in a year and a half—while simultaneously experiencing another decrease in the value of newly signed design contracts.
Regional variations painted a complex picture of the industry's current state. The Midwest stood out as the only region where billings remained essentially flat for the second consecutive month, while firms in all other regions experienced softening conditions. Western firms continued to face the most challenging business environment, with conditions remaining softest in that region. Northeast firms saw their billing decline pace hold steady, while Southern firms experienced further weakening after showing signs of approaching growth during the summer months.
Specialization-based performance also varied significantly across the industry. Firms specializing in commercial and industrial projects saw their billing decline accelerate this month, returning to levels observed at the beginning of 2025 after approaching growth during the third quarter. This represented a notable reversal for this sector. Meanwhile, firms focusing on institutional and multifamily residential projects continued to experience overall soft conditions, with little improvement from previous months.
The broader economic environment contributed to the challenging conditions facing architecture firms. Due to a recently ended government shutdown, limited economic data has been available since late September. However, September inflation data released in late October revealed that the Consumer Price Index increased by 0.3% from August, resulting in an average annual increase of 3.0%—the highest level since January. Gasoline prices served as the primary contributor to this increase, despite some moderation in other energy prices and food costs.
In response to persistent inflation concerns, the Federal Reserve decided to lower interest rates by an additional 0.25 percentage points at its October 29 meeting. Federal Reserve officials indicated they might implement one additional rate cut at their December meeting, though they may have to make this decision without comprehensive economic data due to the extended government shutdown period.
Looking ahead, architecture firm leaders expressed cautious expectations for both 2025 and 2026. Survey responses revealed that firms expect their net revenue to decline by an average of 1.2% in 2025 compared to 2024. The outlook was mixed among respondents, with 38% expecting revenue declines, 32% anticipating increases, and 30% projecting revenue levels similar to the previous year.
Regional and firm size differences were particularly pronounced in revenue projections. Midwest firms bucked the trend by expecting modest growth of 2%, while large firms with annual billings of $5 million or more projected growth of just 1%. In stark contrast, small firms with annual billings below $250,000 anticipated revenue declines averaging 7% for the year. Nearly half of all firms (46%) reported that their current revenue estimates fell short of their beginning-of-year expectations, though 20% indicated their revenue exceeded initial projections, particularly large firms, Midwest-based companies, and those specializing in multifamily residential projects.
The 2026 outlook remained similarly subdued, with most firms projecting flat net revenue performance, declining by an average of 0.9%. Northeast firms and small companies expected the largest decreases, at 3% and 8% respectively. Only large firms and multifamily residential specialists projected slight growth, at 0.5% and 0.6% respectively.
Firms projecting revenue increases in 2026 cited several key factors driving their optimism. Current project backlog suggesting growth was identified as a major factor by 43% of respondents, followed by expectations that delayed or stalled projects would restart (35%), and higher levels of inquiries for new projects (33%). However, most firms indicated that being fully staffed and able to increase billings wasn't a significant factor (57%), nor were slowing construction markets taking pressure off construction labor and materials prices (42%).
Conversely, firms expecting revenue decreases in 2026 pointed to more concerning trends. Nearly three-quarters (70%) identified current projects winding down with fewer new ones on the horizon as a major factor, while 63% cited uncertain economic conditions discouraging potential clients from pursuing projects. Despite the government shutdown's impact during the survey period, 41% of respondents indicated they don't expect longer-term impacts to significantly affect their 2026 revenue decline.
Firm representatives provided additional insights into regional conditions through the Work-on-the-Boards panel. A 55-person Northeast institutional firm noted that the region "remains incredibly difficult to develop in due to increased requirements on affordable units and high construction costs in Boston, and low margins and lack of infrastructure (power/sewer) to support new developments outside the city." The firm reported working to diversify outside the Northeast to avoid dependence on local conditions.
More optimistic perspectives emerged from other regions. A 40-person Midwest residential firm observed that "we are starting to see many projects shake loose in the multifamily sector." Similarly, a 43-person West Coast commercial/industrial firm reported conditions "still seem to be strong, as the area keeps getting companies moving into the state from other states, which increases the need for housing, retail, etc." However, even positive outlooks carried notes of caution, with a 27-person Southern institutional firm stating conditions are "okay today, but in six months, we have concerns."
The American Institute of Architects will host a free webinar titled "Economic Update: Q4 2025 ABI Insights" on Thursday, November 20, 2025, at 2 PM Eastern Time, providing additional analysis of these trends and their implications for the architecture industry moving forward.
