When we asked architects in our recent Archinect Business Survey about their economic outlook, one of the five big factors behind the architecture industry’s current economic slowdown mentioned most frequently by participants was high construction costs. 

"Construction costs are exceeding even the most pragmatic estimate," the owner of a large Seattle-based architecture firm shared in our survey. Another small-firm owner in New York City said: "Construction costs are so high that they quickly outstrip the value of a project." "Clients are telling me that it is getting harder and harder to build and that costs show no sign of slowing down," another NYC architect working at a large firm told us.

When asked about clients' sentiments in the current economic environment, one respondent told us, "They are in a holding pattern," reflecting a common reality of uncertainty felt directly by many architecture firms. 

Two other top factors mentioned most frequently by survey respondents — interest rates and inflation — further contribute to the rise in high construction costs and dip in client confidence. 

The survey responses correspond with market conditions we've been observing in our reporting on construction spending and input prices. There are no immediate signs that inflated material and labor expenses will return to pre-pandemic levels. 

As a result, as has been shown, the total price of inputs to new construction is now 41% higher than it was in February 2020.

The implications this has meted out on the total economy for architecture businesses (e.g., new projects pursued, their size and other constraints, etc.) are something to keep an eye on, as with other factors such as a forstalled return-to-office and trends endemic to residential design. 

Dive into our detailed analysis of the reader survey findings and our summary of the five big factors architects blamed for slowing business conditions.

How has work in your firm or sector been feeling recently? Let us know in the comments below.