November 1, 2024

Reading Time: 27 minutes

Navigating Economic Uncertainty in Architecture: From Market Cycles to Strategic Resilience

by AIA New Jersey President Brian Penschow, AIA

 

Part 1: Introduction – The Interplay of Economic Forces in Architecture

The architecture industry is uniquely sensitive to economic forces, often mirroring trends in the broader business cycle while operating on its own timeline. These patterns are often visible through the Architectural Billings Index (ABI), a leading economic indicator published by the
American Institute of Architects (AIA). The ABI measures billings across architecture firms and is widely regarded as a forecasting tool for future construction activity, making it a valuable lens for understanding economic ebbs and flows in the built environment. Currently, the ABI is experiencing a record downturn, with a 20-month streak of decline, suggesting a significant drop in non-residential construction demand. This decline brings up questions about the industry’s stability, potential economic pressures on firms, and how architects can respond strategically to maintain resilience.

 

Understanding Economic Forces on Architecture

Architecture firms sit at the intersection of numerous economic forces, including the real estate market, lending rates, client investments, and broader economic health indicators such as employment rates and consumer confidence. These forces operate within the larger context of the business cycle, which typically follows phases of expansion, peak, contraction, and trough.
While economic expansions bring about higher demand for architectural services due to increased consumer and business spending, contractions reduce client willingness to invest in new projects.
The architectural sector is often considered a bellwether of economic health due to its position at the early stages of the construction pipeline. For instance, an increase in architectural billings today may indicate an uptick in construction activity six to nine months later, as projects move through design, permitting, and financing stages before breaking ground. This forecasting ability makes the ABI a critical tool for policymakers, investors, and architects alike, as it offers insight into anticipated market conditions long before construction labor or material demands adjust accordingly.

                             
The Role of the Architectural Billings Index (ABI)

The ABI, introduced in 1995 by the AIA, tracks monthly billings reported by architecture firms across the United States. A score above 50 represents an increase in billings, signaling potential growth in construction, while a score below 50 indicates a decline in architectural demand.
Unlike general economic indicators that reflect broad market conditions, the ABI zeroes in on architecture as an early indicator within the construction sector, reflecting shifts in non-residential construction activity that encompass institutional, commercial, and industrial projects.
Over the past two decades, the ABI has tracked well with broader economic trends, such as the 2008 recession and the 2020 COVID-19 pandemic, each of which saw steep ABI declines that predated reductions in construction activity. Following COVID-19, however, the ABI’s recovery was slower than that of the broader economy, indicating unique sectoral pressures, including project cancellations, disruptions in client financing, and inflationary pressures on materials.
Today’s 20-month ABI decline echoes a similar concern, reflecting not only inflation and high interest rates but also a cautious investment climate that has significantly impacted architectural demand.

How Business and Construction Cycles Impact Architecture

Architecture firms operate within a subset of the overall business cycle known as the construction cycle. While these cycles often move together, they sometimes fall out of alignment due to factors unique to construction, such as long project lead times, regulatory requirements, and high capital requirements. The construction cycle typically lags behind the broader business cycle because architectural services are among the initial steps in the building process. Projects move through stages of feasibility studies, architectural design, and permitting long before breaking ground. As such, while other sectors may quickly feel the impact of economic downturns, architecture often experiences delays, seeing effects only after project backlogs diminish and client investment slows.

During economic expansions, construction demand typically rises alongside the broader economy as businesses and governments invest in new buildings and infrastructure. However, in periods of economic contraction, architecture firms may continue working on projects that were initiated during better economic conditions, creating a temporary buffer. This lag can be misleading, as firms may assume demand remains stable only to experience sudden project cancellations or slowdowns as current work wraps up and fewer new projects enter the pipeline.
For example, in the wake of the 2008 financial crisis, the architecture industry continued to operate on pre-existing projects, but a steep decline in new projects led to an eventual contraction in 2009 and 2010. Many firms faced abrupt revenue drops as new project starts dried up, highlighting the industry’s vulnerability to sudden demand shifts. Similar trends were seen after the initial COVID-19 disruptions, with a delayed but sharp decline in architectural demand as projects were paused or canceled due to financial uncertainty.

Election Outcomes and Policy-Driven Impacts on the ABI

Political shifts, especially around presidential elections, can significantly impact the architecture industry, primarily through changes in economic and regulatory policies that influence investment in public and private projects. Each administration brings its priorities and
approaches to issues such as infrastructure funding, environmental regulations, and tax policies, all of which have direct implications for architecture.
If the incumbent administration continues post-2024, current policies like the Inflation Reduction
Act, infrastructure funding, and green building incentives will likely persist. These policies favor
sustainable and public infrastructure projects, potentially providing stability to architecture firms
working on institutional or environmental projects. In contrast, if a new administration with a
focus on deregulation and private sector incentives takes office, sectors such as commercial real
estate and industrial construction may benefit, while public or sustainable-focused projects could
see reduced federal support.
These differing policy approaches underscore the importance of diversification in architectural
portfolios. By balancing projects across private and public sectors, as well as adapting to
emerging priorities, architecture firms can create resilience against political fluctuations.
Strategies for Architects in an Economic Downturn
Amid prolonged declines in architectural billings and potential shifts due to the upcoming
election, firms must prepare for economic uncertainty. Strategies for financial resilience are
critical, especially as projects become scarce and clients face their own budgetary constraints.
Firms can begin by tightening operational costs, prioritizing essential spending, and strategically
investing in areas that foster client loyalty and brand visibility.
For small firms, immediate actions may include reducing office space, adopting flexible staffing
models, and closely monitoring cash flow through regular invoicing practices. Medium and large
firms may have more resources to support marketing and business development efforts, which
are crucial for maintaining visibility and attracting future work even during economic downturns.
An additional area of focus during economic slowdowns is diversification. By offering
consulting services such as feasibility studies, sustainability assessments, or regulatory guidance,
firms can generate steady income while avoiding the high costs associated with full project
execution.
Building Long-Term Resilience
With insights from the ABI, economic indicators, and an understanding of how construction and
business cycles align or diverge, architects are better positioned to weather economic storms and
adapt to changes in market demand. Investing in long-term relationships, refining operational
efficiency, and diversifying service offerings all play critical roles in maintaining firm resilience
through periods of economic uncertainty.

Part 2: Understanding the Architectural Billings Index and
Economic Cycles
The Architectural Billings Index (ABI), established by the American Institute of Architects
(AIA), is one of the primary indicators for tracking demand within the architectural and
construction industries. Unique among economic indicators, the ABI is both highly specialized to
architecture and regarded as an early predictor for future construction trends. It has become an
essential tool for firms navigating fluctuations in demand, as it offers a glimpse into the months
ahead in terms of anticipated construction activity, allowing firms to make proactive business
decisions based on likely future market conditions.
The Mechanics of the ABI
Each month, the AIA surveys architectural firms across the U.S. to gauge changes in billings
from one month to the next. The ABI results are presented on a scale, with scores above 50
indicating an increase in billings (suggesting growth in architectural demand) and scores below
50 representing a decrease. This monthly snapshot captures the financial health of architecture
firms across various project types and geographic regions. Given that architectural services often
precede construction by six to twelve months, shifts in the ABI signal similar shifts in
construction activity down the line.
For example, if the ABI reports several months of growth in architectural billings, it suggests a
higher likelihood of construction activity rising in the coming months as those projects advance
through the design phase to construction. Conversely, prolonged declines in the ABI, such as the
current 20-month downturn, often signal reduced construction demand ahead, as projects stall or
budgets tighten.
What Makes the ABI Unique?
The ABI’s design is specialized to address architecture as a leading economic indicator,
distinguishing it from general economic indices like GDP or consumer spending. This
specialization arises because architecture functions as an early stage in the building process.
Architects are typically the first engaged in new projects, conducting feasibility studies, creating
initial designs, and obtaining permits. As such, when architecture firms report increased billings,
it reflects an influx of new projects in the pipeline, while reduced billings indicate a contraction
in future construction projects.
This predictive capacity is crucial for other stakeholders, including contractors, suppliers, and
policymakers, who look to the ABI for early signals of demand changes. For example, a
construction firm might use ABI trends to adjust its labor force or order materials in alignment
with expected demand, while policymakers may interpret declining ABI scores as an indicator of
broader economic contraction, especially in non-residential investment.

ABI and Its Correlation with the Business Cycle
The business cycle—comprising phases of expansion, peak, contraction, and trough—represents
the natural rhythm of economic activity over time. As the economy expands, demand across
industries rises, spurring new investments and encouraging business growth. During a peak,
economic activity reaches its maximum output, often accompanied by high employment and
consumer spending. A contraction, however, signals a slowdown in activity as businesses cut
back on spending, leading to lower demand for services and often resulting in recessionary
conditions. Finally, at the trough, economic activity hits its lowest point, eventually setting the
stage for the next phase of recovery and expansion.
Architecture and construction cycles typically align with the broader business cycle, but the
alignment isn’t exact. Architecture cycles, tracked through the ABI, tend to precede both
construction activity and the business cycle due to the long lead times involved in completing
architectural and construction projects. When the economy enters a contraction, architecture
firms may initially remain busy due to backlogged work and previously funded projects, creating
a delay before the sector feels the full impact. Conversely, as the economy begins to recover, the
architecture sector often benefits sooner, with increased inquiries and billings that signal renewed
client confidence and investment.
Divergence of Business and Construction Cycles
The business cycle and construction cycle often diverge due to sector-specific factors that affect
architecture and construction uniquely. For example, construction projects have long lead times
and involve extensive permitting, financing, and planning processes, leading to a delayed
response to economic changes. While consumer goods or retail industries can quickly adapt to
economic shifts, construction projects already in motion are less flexible.
When the economy begins to contract, architecture may initially feel a minimal impact due to
backlogged projects. However, as new project inquiries slow, architectural billings eventually
decline, leading to a subsequent reduction in construction activity. This delay creates a situation
where architecture firms, and the broader construction industry, may experience the effects of an
economic downturn months or even a year after other sectors.
Additionally, architecture and construction cycles may be affected by regulatory and policy
factors that differ from broader economic influences. Government policies—such as
infrastructure spending programs, housing subsidies, or tax incentives—can temporarily insulate
the sector from economic cycles, especially in areas like public infrastructure, housing, and green
building.
ABI in Recent Economic Downturns
The ABI’s patterns during significant economic events, like the 2008 financial crisis and the
2020 COVID-19 pandemic, demonstrate its alignment with broader economic cycles and its
predictive power within the construction sector. During the 2008 crisis, the ABI reported

declining billings well before the broader construction sector contracted, as architectural demand
diminished in response to decreased client confidence and limited financing. By the time the
construction industry fully felt the impact, the ABI had already indicated prolonged contraction,
giving firms a glimpse into the downturn.
Similarly, the COVID-19 pandemic highlighted the ABI’s sensitivity to rapid economic changes.
As global economies shut down, the ABI plummeted, reflecting widespread project delays and
cancellations. Recovery in the ABI was slower than in other sectors as architecture, with its
longer project timelines and dependence on discretionary spending, faced unique hurdles.
Projects that paused or were canceled created gaps in the pipeline, leading to prolonged periods
of low architectural demand even as the broader economy began to reopen.
In the current economic climate, the ABI’s 20-month decline serves as an early indicator of
reduced construction demand, especially in non-residential projects, amid concerns over
inflation, high interest rates, and economic uncertainty. While some sectors, like institutional and
public infrastructure, may experience resilience due to steady funding, commercial and
multifamily residential projects face heightened risks as investors delay or reduce spending.
Reading the ABI in the Context of a Shifting Economy
Understanding the ABI’s function and interpreting its signals can help architecture firms adapt
their strategies to changing economic conditions. For firms, an extended period of declining ABI
scores may indicate the need for caution in taking on new overhead costs or expanding
headcount. Conversely, periods of steady or increasing ABI scores suggest that the architecture
and construction sectors are positioned for growth, encouraging firms to pursue more aggressive
business development efforts.
It’s essential for firms to view the ABI not as a standalone indicator but as part of a larger
economic picture. Factors such as changes in Federal Reserve interest rates, lending standards,
and federal spending programs all play a role in how architectural demand evolves. For instance,
the Federal Reserve’s interest rate hikes aimed at controlling inflation impact financing costs,
which can stifle demand for new construction projects as developers face higher borrowing costs.
Conversely, programs like the Infrastructure Investment and Jobs Act and the Inflation
Reduction Act could help buffer architectural demand in public and green building projects,
where federal funding remains a stabilizing force.
The ABI as a Strategic Tool for Business Planning
For architecture firms, the ABI’s monthly insights offer valuable guidance for business planning.
During periods of decline, firms may shift resources toward sectors that are historically resilient,
such as healthcare, government, and infrastructure projects, where public funding may continue
to provide demand even as private investments slow. In contrast, periods of growth may prompt
firms to expand staffing, invest in new technology, or pursue additional marketing to capture an
increase in private-sector projects.

Furthermore, understanding the ABI’s historical trends and context helps firms make more
informed long-term decisions. For instance, many firms that closely tracked the ABI before the
2008 financial crisis recognized early signals of reduced demand, enabling them to scale back on
expansion efforts and adjust project pipelines accordingly. Firms that monitor the ABI monthly,
adjust based on economic cycles, and strategically diversify their project portfolios are often
better equipped to navigate economic downturns and capitalize on growth periods.
In the next section, we’ll explore the direct impact of economic downturns on cash flow within
architecture firms of different sizes, examining how each type of firm can adapt and insulate
against financial strain.

Part 3: Economic Downturns and Cash Flow Challenges for
Architecture Firms of All Sizes
Economic downturns impact architecture firms uniquely, due to the sector’s reliance on long
project timelines and upfront design phases, making cash flow management critical in
challenging periods. Whether small, medium, or large, architecture firms face distinct financial
pressures during downturns, often beginning with project delays or cancellations, slowed client
payments, and reduced demand for new work. This section will explore the common cash flow
challenges architecture firms encounter during economic contractions, examining how firms of
different sizes can respond strategically.
Small Firms: Flexibility with Limited Financial Buffers
Small architecture firms, typically with fewer than 10 employees, often operate with minimal
financial reserves and limited resources to absorb unexpected economic shocks. A small firm
may have strong client relationships but may be particularly vulnerable if just one or two clients
delay payments or cancel projects, creating significant cash flow disruptions.
Key Cash Flow Challenges for Small Firms
1. Client Payment Delays: Small firms may rely heavily on a small number of clients, and
late payments can quickly lead to cash flow issues, especially when overhead costs
remain steady.
2. Project Pipeline Uncertainty: Small firms often depend on continuous new projects to
sustain revenue. During downturns, project pipelines can dry up, leaving firms
scrambling to find replacement work.
3. Minimal Financial Reserves: With limited financial buffers, small firms may struggle to
cover costs if cash flow diminishes suddenly.
Strategic Responses for Small Firms
 Flexible Staffing: Instead of hiring full-time employees, small firms can rely on contract
or freelance architects, reducing fixed payroll expenses. This flexibility allows firms to
scale resources up or down as project demands change.
 Cash Flow Management Practices: Implementing strict billing intervals and requiring
upfront deposits can help small firms maintain a steady cash flow. Weekly or bi-weekly
invoicing, as opposed to monthly, ensures a more consistent income stream.
 Co-working or Remote Work: To reduce overhead, small firms can consider co-
working spaces or fully remote work setups, minimizing rent and utility expenses. With
fewer employees, these firms can be more agile in terms of where and how they operate.
Medium Firms: Balancing Overhead with Project Efficiency

Medium-sized firms, which typically range from 10 to 50 employees, face a different set of
challenges. These firms often have a more diversified client base and project types, which can
provide some stability. However, they also have higher fixed costs, including office leases,
technology, and specialized staff, which make it harder to adjust quickly when cash flow
declines.
Key Cash Flow Challenges for Medium Firms
1. Fixed Overheads: With office space, administrative staff, and technology requirements,
medium firms have considerable fixed costs, making it challenging to adjust expenses
quickly.
2. Project and Staffing Balance: Medium firms often need to balance enough staff to
complete projects efficiently without overextending resources during downturns.
3. Extended Project Timelines: With larger projects in their portfolio, medium firms can
experience delays in project payments tied to specific milestones, increasing financial
pressure in low-billing months.
Strategic Responses for Medium Firms
 Operational Efficiency and Cost Management: Renegotiating vendor contracts,
consolidating software licenses, or reducing travel expenses can significantly reduce
operating costs. Medium firms can also consider temporary furloughs for non-essential
staff to control costs while keeping key project personnel engaged.
 Technology Investments for Workflow Optimization: Implementing or expanding
project management and cash flow tracking software helps monitor resources and ensure
accurate billing. Medium firms can also use automation tools for accounting and
invoicing to streamline cash flow practices.
 Project Diversification: Focusing on sectors that are resilient during downturns—such
as healthcare, public infrastructure, and education—can stabilize revenue. While private
commercial projects may decline, institutional work funded by public sources tends to
remain stable, providing more reliable cash flow.
Large Firms: Managing Cash Flow with High Fixed Costs and Extensive
Staffing
Large architecture firms, often with over 50 employees, generally have access to larger reserves
and more diversified project portfolios, making them somewhat more resilient to economic
shifts. However, large firms also carry substantial overhead costs due to extensive staffing, office
space, and large-scale technology requirements. Economic downturns can still strain these firms,
especially if several major projects are delayed or canceled simultaneously, impacting revenue
significantly.
Key Cash Flow Challenges for Large Firms

1. High Overheads and Staffing Costs: With multiple departments, large firms have high
fixed costs, including salaries, office space, and operational expenses, which are not
easily scaled down.
2. Delayed or Cancelled Major Projects: Large firms often manage projects with long
lead times and significant upfront investment, making delayed or canceled projects
particularly disruptive to cash flow.
3. Complex Cash Flow Management: Managing cash flow across numerous projects,
departments, and clients adds complexity, requiring robust financial systems to track
receivables and allocate resources effectively.
Strategic Responses for Large Firms
 Selective Staff Reductions and Role Adjustments: Instead of mass layoffs, large firms
can selectively reduce staffing in non-essential areas, such as administration or
marketing, while retaining project-critical personnel. Alternatively, they may transition
some staff to contract roles to maintain flexibility.
 Focus on High-Value Clients and Sectors: Large firms can prioritize sectors less
impacted by downturns, such as government contracts, infrastructure, or high-end
residential projects for affluent clients. These sectors often remain stable or recover more
quickly, providing a foundation for ongoing revenue.
 Enhanced Financial Management Practices: Implementing advanced financial
management software to track cash flow across projects and departments allows large
firms to identify cash flow gaps and manage invoices and expenses more precisely.
Strategic planning can also include setting aside cash reserves from high-billing periods
to bridge leaner times.
Summary: Preparing for Financial Resilience Across Firm Sizes
Across small, medium, and large firms, cash flow challenges during downturns require strategic
cost-cutting, efficient billing practices, and adaptive staffing solutions. By diversifying project
portfolios, prioritizing client sectors that tend to remain resilient, and adopting flexible cost-
management strategies, architecture firms can better withstand the financial pressures of
economic downturns. The next section will examine how changes in the U.S. presidential
administration can impact architectural demand and influence the strategies firms might adopt in
anticipation of new policies.

Part 4: Impact of U.S. Presidential Elections on the ABI and
Architectural Demand
The U.S. presidential election can significantly impact architecture firms by influencing
economic policies, regulations, and funding priorities. This, in turn, affects the Architectural
Billings Index (ABI), which is often sensitive to shifts in client confidence, public spending, and
the broader economic outlook shaped by political leadership. With the upcoming 2024 election,
architecture firms are evaluating how different election outcomes might influence their industry,
potentially altering the demand landscape across public, commercial, and residential projects.
This section explores these anticipated impacts, offering insights into how architecture firms can
prepare for either scenario.
How Elections Influence Economic Confidence and Architectural Demand
Presidential elections often create temporary uncertainty in the economy as clients, investors, and
developers await new policy directions. Historically, election cycles have affected the ABI as
clients hesitate to commit to long-term projects amid potential changes in federal spending,
interest rates, and regulatory policies. This tendency is especially strong in sectors that rely on
significant capital investment, like architecture and construction, where projects involve multi-
year planning and considerable upfront costs.
The ABI can thus experience a temporary dip during election years, as clients defer project
decisions until the political landscape stabilizes. However, the ABI’s response is also shaped by
post-election policies, which influence demand in different ways depending on the
administration's focus. An administration prioritizing infrastructure and green energy initiatives
might lead to ABI gains in institutional and environmental projects, while an administration
focused on deregulation and private-sector incentives may benefit commercial and industrial
sectors.
Potential Outcomes if the Incumbent Party Continues (Biden
Administration)
If the Biden administration continues, policies such as the Inflation Reduction Act (IRA),
Infrastructure Investment and Jobs Act (IIJA), and other climate-focused initiatives are expected
to remain in effect. These policies have already earmarked substantial funding for green building
projects, public infrastructure improvements, and renewable energy initiatives, potentially
creating sustained demand for architecture firms involved in public and environmental projects.
Expected Impacts on the ABI Under Biden Administration Policies
1. Increase in Public and Green Building Projects
The IRA and IIJA focus heavily on sustainable infrastructure and energy-efficient
buildings, which align with the architectural sector’s growing emphasis on sustainable

design. If these policies remain in place, the ABI could see increased activity in sectors
like healthcare, public transportation, and green building retrofits. Architecture firms
specializing in energy-efficient design, renewable energy integration, or environmentally
friendly materials may experience heightened demand from government-backed projects
and green certification programs.
2. Stabilization in Institutional and Infrastructure Projects
The administration’s commitment to infrastructure provides stability to architecture firms
working in institutional and public spaces, such as schools, hospitals, and transportation.
Since these projects are less susceptible to market volatility, they help stabilize the ABI,
particularly if the private sector experiences downturns. Government funding for public
projects often remains steady even during economic slowdowns, providing a reliable
revenue source for firms with the necessary expertise.
3. Potential Downturn in Private-Sector Projects Due to Regulatory Focus
The Biden administration’s regulatory focus on environmental standards and labor
protections may lead to increased project costs, which can deter private-sector
investments. This focus could cause a divergence in the ABI between public and private
sectors, with private commercial projects lagging due to higher operational costs and
compliance requirements.
Potential Outcomes if the Challenging Party Wins (Republican
Administration)
A new Republican administration could prioritize tax cuts, deregulation, and reduced public
spending, particularly on projects perceived as environmentally focused or heavily regulated. A
shift to such policies could create a more favorable environment for private-sector investments
while impacting publicly funded green and infrastructure projects.
Expected Impacts on the ABI Under a Republican Administration
1. Increased Demand for Commercial and Industrial Projects
A Republican administration focused on deregulation could benefit private commercial,
industrial, and residential development. By reducing environmental regulations and
incentivizing business investments, architecture firms working on large-scale residential
or commercial projects may see an uptick in demand. Developers who postponed projects
due to regulatory concerns might initiate work under a less restrictive environment,
which could positively affect the ABI in these sectors.
2. Reduced Support for Public and Green Initiatives
A shift away from public funding for green building and sustainable infrastructure could
slow demand in institutional sectors that rely on government grants, particularly for
sustainability-focused projects. Architecture firms that specialize in green design, LEED
certification, or public infrastructure might experience reduced demand if funding for
these projects is curtailed. This could result in lower ABI scores for institutional and
environmental project categories, leading firms to refocus on more lucrative private-
sector work.
3. Interest Rate Policies and Construction Financing
A Republican-led administration might favor policies aimed at lowering interest rates and

encouraging private investment, which would support financing for new projects. Lower
borrowing costs benefit developers and increase project feasibility, potentially stimulating
demand for architecture services across sectors like multifamily residential and
commercial. This policy environment could foster higher ABI scores in residential and
commercial projects as clients gain easier access to financing, though it might reduce
government involvement in large-scale public projects.
Strategies for Architecture Firms to Prepare for Post-Election Impacts
Regardless of the election outcome, architecture firms can proactively position themselves to
adapt to changing policies by diversifying services, developing flexible project portfolios, and
monitoring emerging trends. Here are several strategies firms can use to maintain resilience and
stay adaptable amid election-driven shifts:
1. Diversify Client Base and Project Types
Firms that serve both public and private clients across sectors like healthcare,
commercial, and residential will be better positioned to adjust as demand fluctuates. By
cultivating a mix of institutional, commercial, and residential projects, architecture firms
create a balanced portfolio that can adapt to policy changes, regardless of the
administration in power.
2. Enhance Expertise in Key Policy Areas
Keeping abreast of emerging policy areas, like sustainable design or housing, allows
firms to capitalize on sectors that align with federal priorities. If green building standards
remain a priority, investing in sustainable architecture credentials and certifications can
increase competitiveness. Alternatively, a shift toward deregulation could mean greater
demand for firms with expertise in cost-effective, high-density residential design.
3. Invest in Financial and Cash Flow Management
Economic fluctuations following elections can create delays in project starts or payments,
particularly in sectors directly affected by policy changes. By enhancing cash flow
management, firms can maintain financial stability. Strategies like shorter billing cycles,
upfront payments, and improved receivables tracking provide a buffer during uncertain
economic periods.
4. Monitor the ABI and Broader Economic Indicators
Firms that track the ABI in conjunction with other economic indicators, such as the Fed’s
interest rate announcements and infrastructure funding, can more accurately predict
demand trends. This awareness enables architects to make data-driven decisions about
staffing, marketing, and capital investments, allowing for more flexibility when the
political and economic landscape shifts.
Conclusion
Presidential elections bring unique economic and policy-driven pressures that ripple through the
architecture industry. By understanding how potential election outcomes could impact the ABI,
architecture firms can proactively adjust strategies, strengthen financial practices, and diversify
client bases to navigate post-election changes. These proactive steps empower firms to remain
resilient and adaptable, regardless of which administration takes office.

Part 5: Strategies for Long-Term Resilience Amid Economic
Uncertainty
Building a resilient architecture firm requires strategic planning and adaptability, particularly
during periods of economic uncertainty. Economic downturns often bring slower project
demand, tighter budgets, and increased competition for fewer available projects. To thrive under
these conditions, architecture firms—whether small, medium, or large—need to adopt long-term
resilience strategies that encompass financial planning, service diversification, and efficient
operations. This section explores proven approaches to maintain stability and growth, focusing
on elements like diversification, technology investments, and community engagement.
Diversifying Services and Project Portfolios
Diversification is a cornerstone of resilience. By offering services across various sectors—such
as commercial, residential, institutional, and governmental projects—architecture firms can
buffer themselves against economic fluctuations that impact specific markets. For instance,
public-sector projects, especially in healthcare, education, and infrastructure, tend to remain
stable even in downturns due to their reliance on public funding. Expanding services to include
these sectors can provide a steady revenue stream that compensates for declines in private-sector
demand.
Expanding into Advisory and Consulting Services
One effective approach to diversification is to offer consulting services in areas like regulatory
compliance, feasibility studies, or sustainability assessments. These services require minimal
overhead, allowing firms to generate income without the cost of full project execution.
Consulting services also position firms as thought leaders in specialized areas, attracting clients
who may later engage them for full-scale architectural projects when economic conditions
improve. Expanding into sustainability consulting, for instance, can be especially valuable given
the increasing emphasis on energy efficiency and green building in both public and private
sectors.
Sector-Specific Diversification Strategies
Firms can also diversify within sectors by focusing on niche areas like adaptive reuse,
multifamily housing, and modular construction, which tend to perform well in various economic
conditions. Adaptive reuse, for example, allows architects to convert existing structures into new
uses, appealing to clients looking for cost-effective solutions that leverage current assets rather
than new builds. By identifying sectors less affected by economic cycles, firms can create a
balanced portfolio that sustains revenue during downturns.
Strengthening Financial Practices for Resilience
Sound financial management is essential for withstanding economic volatility. During
downturns, maintaining positive cash flow and minimizing debt obligations can help firms
preserve stability.

Establishing Cash Flow Management Practices
One critical aspect of financial resilience is effective cash flow management. This includes
establishing shorter billing cycles, implementing partial payments upfront, and closely
monitoring receivables to avoid delays. For many architecture firms, switching to monthly
invoicing or setting up automatic billing helps create a steady income stream, reducing reliance
on large, infrequent payments.
Building Financial Reserves
Maintaining a financial reserve or “rainy day” fund is crucial, particularly for firms that are
heavily project-dependent. Allocating a percentage of income to a reserve fund during high-
billing periods can help cover operating expenses during leaner months. Financial experts
recommend setting aside three to six months of operating costs as a buffer, which can be
particularly valuable for firms working on long-term or delayed projects.
Exploring Cost-Saving Opportunities
Cost control is also key to managing finances during economic uncertainty. This might involve
reevaluating leases, reducing discretionary spending, and exploring shared resources like co-
working spaces to minimize rent costs. Firms should prioritize spending on revenue-generating
activities while minimizing expenses in non-essential areas like travel or large events, which can
add up quickly without directly impacting the bottom line.
Leveraging Technology for Operational Efficiency
Investing in technology can improve workflow efficiency, reduce errors, and enable architecture
firms to handle projects more cost-effectively. For instance, Building Information Modeling
(BIM) software not only improves collaboration across teams but also allows for precise cost
estimation and real-time adjustments, reducing waste and streamlining processes.
Project Management Software
Project management software is a valuable tool for tracking time, resources, and budgets across
multiple projects, enabling firms to allocate resources effectively and avoid budget overruns. By
automating invoicing, scheduling, and resource allocation, project management software helps
firms improve cash flow management and reduce administrative costs.
Expanding Remote and Digital Capabilities
During times of economic uncertainty, firms may consider partial or full transitions to remote
work, reducing office-related expenses. Additionally, cloud-based project management and
design tools allow for collaboration from anywhere, enabling firms to expand their client base
beyond local projects and into regions with stronger demand.
Focusing on Marketing and Client Relationships
Maintaining visibility in the market is crucial for resilience, as it positions firms to attract new
clients and retain existing ones even during slow periods. Marketing efforts can be relatively
low-cost but highly effective, particularly when directed at digital channels and community
engagement.

Digital Marketing and Content Strategy
Investing in digital marketing, such as an optimized website, social media presence, and content
marketing, can keep a firm visible without substantial upfront costs. Providing educational
content, such as blog posts on trends or newsletters on industry insights, establishes a firm as a
thought leader and builds trust with potential clients. Platforms like LinkedIn allow firms to
share updates, connect with prospective clients, and highlight recent projects, enhancing their
reach and credibility.
Client Retention and Relationship Building
Strong client relationships are a firm’s foundation for stability. Maintaining regular
communication with past and current clients helps reinforce loyalty and ensures the firm is
considered for future projects. Offering value-added services, such as maintenance check-ins for
completed projects, or hosting client appreciation events, fosters long-term loyalty. Firms that
prioritize client satisfaction often benefit from referrals and repeat business, both of which are
invaluable during downturns.
Developing Adaptability and Flexibility in Project Delivery
Flexibility in project delivery can help architecture firms manage fluctuations in demand more
effectively. By offering scalable services that can be tailored to various project sizes and types,
firms can meet client needs even when budgets are limited. This adaptability may involve
modular construction options, phased project implementation, or design-to-build services that
minimize time and cost.
Exploring Modular and Prefabricated Design
Prefabricated design allows firms to offer cost-effective solutions to clients who may be facing
budget constraints. Modular construction, which involves creating standardized building
components off-site, reduces construction time and expenses while maintaining design quality.
This approach is gaining traction, especially in sectors like housing and hospitality, where cost
efficiency is paramount.
Offering Phased Implementation
For clients with constrained budgets, phased project implementation provides flexibility by
allowing projects to be completed in stages. Phased implementation enables clients to proceed
with construction incrementally, investing in priority areas first and expanding as budgets allow.
This approach can be particularly useful in larger public-sector projects, which often receive
funding in stages.
Emphasizing Sustainability and Resilience in Design
With increasing awareness of climate risks, clients are prioritizing resilient and sustainable
design. For architecture firms, offering expertise in resilient design not only meets market
demand but also aligns with long-term economic trends that favor sustainability. Projects that
incorporate sustainable materials, energy-efficient designs, and climate resilience measures are
likely to attract funding and clients even in uncertain times.

Sustainable and Resilient Design as a Competitive Advantage
Architectural firms that adopt sustainability and resilience principles differentiate themselves by
meeting regulatory standards and attracting clients committed to environmental responsibility.
For instance, offering services in LEED certification, passive building design, or net-zero energy
buildings positions a firm competitively as sustainability becomes more central to public and
private projects alike.
Incorporating Risk Management in Design
Resilient architecture incorporates risk management principles, designing spaces that can
withstand natural and man-made disruptions. This approach can appeal to clients in high-risk
areas or sectors like healthcare and public infrastructure, where building resilience is prioritized.
Risk management in design involves incorporating elements like flood-resistant foundations,
energy-efficient HVAC systems, and adaptive layouts, all of which enhance building longevity
and reduce potential downtime.
Engaging with the Broader Community
Active community engagement builds a firm’s reputation, fosters relationships, and attracts
clients who value socially responsible practices. Participating in local initiatives, sponsoring
community events, or partnering with nonprofits not only supports community resilience but also
keeps a firm visible and involved, even during downturns.
Aligning with Community Goals
By aligning with local and regional goals, architecture firms can attract clients and partners who
prioritize community impact. For instance, partnering on affordable housing projects, community
centers, or public parks demonstrates a commitment to improving local infrastructure, which can
attract public and private funding sources. Community-focused projects also position firms
favorably for municipal and governmental contracts, which may be more stable during economic
uncertainty.
Supporting Workforce Development and Mentorship
During economic slowdowns, many firms reduce hiring, but this period can be ideal for investing
in workforce development and mentorship. Firms can use slower periods to train staff, provide
continuing education opportunities, and develop future leaders. Mentorship programs and skills
training enhance firm resilience by ensuring a capable workforce ready to meet client needs as
the economy recovers.
Conclusion: Building a Resilient Practice for Long-Term Success
By diversifying services, strengthening financial practices, leveraging technology, and fostering
client relationships, architecture firms can build resilience that supports long-term stability and
growth. Emphasizing adaptable project delivery, sustainability, and community engagement
positions firms to navigate economic uncertainty and thrive when demand recovers.

Part 6: Preparing for Post-Election Market Shifts: Adapting and
Thriving
The period following a U.S. presidential election often brings policy shifts that can directly
impact architectural demand, project financing, and client priorities. Architecture firms that
proactively plan for potential changes are better positioned to adapt and thrive in this
environment. By engaging in scenario planning, implementing flexible project management
strategies, and preparing for interest rate fluctuations, firms can respond swiftly to new
opportunities and mitigate risks associated with market uncertainty. Below are key strategies for
architecture firms aiming to prepare for the unique challenges and opportunities that may arise in
the months after an election.
Engaging in Scenario Planning for a Post-Election Market
Scenario planning allows firms to outline potential economic conditions and policy outcomes
and develop strategic responses. This approach can help firms respond to sudden shifts in
funding, regulatory requirements, and demand patterns that may be influenced by the elected
administration’s priorities. Scenario planning involves creating multiple “what-if”
scenarios—both optimistic and conservative—that consider how changes in government policies
could affect project types, client needs, and the overall construction environment.
For example, if the incoming administration emphasizes infrastructure and environmental
initiatives, scenario planning might focus on increasing capabilities in green design, energy-
efficient construction, and public infrastructure projects. Conversely, if there’s a shift toward
deregulation, firms could prepare for potential growth in commercial and private-sector projects,
where less restrictive policies encourage private investment. Identifying key sectors that may
benefit from the administration’s policy priorities—such as healthcare, education, or sustainable
design—allows firms to allocate resources to develop specialized capabilities or partnerships.
In practice, scenario planning could involve:
 Setting Goals: Developing growth and diversification goals based on anticipated sector
demands.
 Resource Allocation: Adjusting staff or budget allocation toward sectors expected to see
increased demand.
 Operational Flexibility: Building in flexibility for rapid project scaling or contraction
based on demand changes.
Implementing Flexible Project Management Strategies
Flexible project management strategies allow firms to adjust project timelines, budgets, and
staffing in response to fluctuating client demands. This adaptability is essential in a post-election
period, where changes in public sector spending, regulatory standards, or client confidence may
require immediate adjustments to existing projects or new approaches to upcoming work.

Phased Project Implementation
Offering phased project delivery is one way to provide flexibility for clients facing uncertain
budgets or regulatory requirements. By completing projects in stages, firms can help clients
prioritize immediate needs while leaving room for future expansions or improvements as budgets
allow. Phased implementation is particularly effective for clients in sectors sensitive to policy
changes, such as municipal governments or non-profits reliant on federal funding. Breaking
projects into stages gives clients flexibility to adapt to budget changes and funding cycles,
making projects more feasible in uncertain economic climates.
Modular and Adaptive Design Solutions
Modular construction techniques are becoming more popular, allowing architects to offer designs
that can be expanded or reconfigured based on client needs or future funding availability.
Prefabricated modules provide cost efficiency and scalability, giving clients options to expand in
the future without extensive redesigns. Firms that offer adaptive design solutions, such as
modular housing or adaptable commercial spaces, are more likely to attract clients seeking value
and flexibility, especially in sectors like healthcare, retail, and education, where space needs can
shift quickly.
Cloud-Based Project Management and Collaboration Tools
Investing in cloud-based project management software allows firms to track project milestones,
billing, and resource allocation in real time, which is particularly useful for remote teams and
clients. Cloud platforms enable easy adjustments to project scopes or timelines and facilitate
remote work arrangements, expanding firms’ geographic reach and reducing the need for
physical office space. Remote capabilities provide a layer of resilience, especially when
government policies or client needs shift unexpectedly.
Emphasizing Adaptability to Attract Clients Across Sectors
In a post-election environment, architecture firms can benefit from casting a wider net across
multiple sectors. Rather than relying on a single type of client or project, firms can adopt a
diversified client strategy, emphasizing adaptability and sector-specific expertise that appeal to a
broad range of industries.
Developing Sector-Specific Expertise
Establishing expertise in multiple sectors, including residential, commercial, healthcare, and
public infrastructure, allows firms to attract diverse clients. Tailoring marketing messages and
client presentations to highlight unique skills in each sector demonstrates versatility and can
reassure clients that the firm understands their specific needs and regulatory requirements. For
example, firms with sustainability credentials like LEED accreditation or experience with health
and safety compliance in public spaces are likely to attract clients in both private and public
sectors.
Marketing for Multi-Sector Visibility
Digital marketing is an effective, low-cost way for firms to enhance visibility across sectors. By
maintaining a strong online presence, sharing sector-specific content, and engaging with industry
groups on platforms like LinkedIn, firms can stay top-of-mind with potential clients. Developing

a portfolio that showcases work in varied sectors also demonstrates capability and builds client
confidence, especially for firms seeking to expand into new areas post-election.
Networking and Community Engagement
Networking within industry associations and participating in local community events can help
firms expand their client base. Many firms find success by engaging with local government
agencies, nonprofits, and developers, building connections that may translate into project
opportunities regardless of economic conditions. Active engagement with local organizations
positions a firm as an invested community member and can attract public and private clients
alike.
Preparing for Possible Interest Rate Adjustments and Their Impact on
Project Financing
Interest rate changes are often a central policy tool for incoming administrations, particularly if
they seek to address inflation or stimulate economic growth. Architecture firms that understand
how interest rate shifts impact project financing can better support clients facing tighter budgets
or financing uncertainties.
Monitoring Interest Rate Announcements
Firms should stay informed about Federal Reserve interest rate announcements, as these directly
affect project financing costs and client budgets. In an environment where interest rates are
expected to rise, private clients may delay or scale back projects due to higher loan costs,
affecting demand for architecture services, particularly in sectors like multifamily housing and
commercial real estate. By anticipating these trends, firms can adjust their business development
strategies to target sectors less affected by interest rates, such as public infrastructure or
institutional projects.
Offering Financially Flexible Project Options
Flexible payment structures can make architectural services more accessible for clients facing
budget constraints. Options like installment payments, phased billing, or early payment discounts
allow clients to manage cash flow more effectively, increasing their ability to move forward with
projects despite high borrowing costs. Additionally, firms can work with clients to re-evaluate
project scopes and prioritize high-impact areas, helping them stay within budget without
compromising critical design elements.
Partnering with Financial Advisors
Collaborating with financial consultants or partnering with advisors familiar with construction
financing can help firms support clients more effectively. By providing clients with insights into
financing options, tax credits, or government grants, architecture firms can facilitate project
financing and help clients navigate economic challenges. Familiarity with financing tools not
only supports clients but also positions the firm as a proactive partner in guiding projects to
completion.
Conclusion: Preparing to Thrive in a Post-Election Landscape

By taking practical steps in the months following an election, architecture firms can adapt and
thrive amid policy changes and economic adjustments. Through scenario planning, flexible
project management, diversified sector engagement, and financial adaptability, firms can position
themselves to attract and retain clients across market sectors. This proactive approach ensures
that firms remain resilient, capable of responding swiftly to post-election shifts, and better
prepared for potential economic and policy changes that influence architectural demand.

Part 7: Conclusion – Building a Future-Proof Architecture Practice
The architecture industry’s resilience depends on proactive planning, financial prudence, and
adaptability to economic and policy changes. Navigating periods of uncertainty, from economic
downturns to political shifts, requires a diversified strategy across client sectors, services, and
operational practices. By balancing these elements, architecture firms of all sizes can prepare to
weather industry cycles and emerge stronger.
Throughout this guide, we explored strategies for adapting to challenges such as the 20-month
decline in the Architectural Billings Index (ABI), cash flow management during downturns, and
potential impacts of the U.S. presidential election on demand. These insights demonstrate that
architecture firms can achieve resilience by focusing on a mix of diversification, flexibility, and
forward-thinking financial practices. Diversifying portfolios with public, private, and
institutional projects reduces dependency on any single market. Additionally, adaptive project
delivery models—like modular design or phased project implementation—help firms
accommodate client budgets while optimizing internal resources.
Equally important, scenario planning and staying informed about economic indicators such as
interest rates and the ABI help firms make data-driven decisions. Monitoring these indicators
enables firms to anticipate demand shifts and adjust resource allocation accordingly. Investments
in technology and client relationship management also strengthen a firm’s foundation, allowing
for efficient project execution and reinforcing long-term client loyalty.
As architecture firms prepare for a future of evolving economic and political landscapes, the
strategies covered here provide a roadmap for resilience. By implementing practices that
prioritize diversification, operational efficiency, and proactive financial management, firms can
secure stability and adaptability. A robust approach to navigating economic cycles empowers
architecture firms not only to withstand market fluctuations but also to seize opportunities as
conditions improve, positioning them to thrive in the years ahead.

Author Biographies
Brian W. Penschow, AIA
Brian W. Penschow is the President of AIA New Jersey and an accomplished architect
specializing in coastal and waterfront design. Through his work with BWP Architecture Firm,
Brian balances the demands of independent design projects with consulting roles, providing him

with a unique perspective on managing market cycles and adapting to economic shifts. Having
personally navigated through economic downturns and complex project landscapes, Brian
emphasizes a resilient, client-focused approach to architectural practice. His commitment to
sustainable design and adaptive strategies informs his work, both in managing client
relationships and building for the future. Outside of his professional responsibilities, Brian is
dedicated to personal growth, reflecting on life’s challenges to enhance his well-rounded
understanding of resilience in business and beyond.
Architect GPT (ChatGPT)
Architect GPT, powered by advanced AI capabilities, serves as a specialized architectural
consultant, offering insights on industry resilience, strategic planning, and practical approaches
for architectural stability and growth. Collaborating closely with Brian Penschow, Architect GPT
provides strategic foresight on managing economic uncertainties, scenario planning, and adaptive
project approaches, aligning its guidance with the realities of modern architectural practice. This
AI-driven consultant combines data with practical expertise to support architects in future-
proofing their practices. Together, Architect GPT and Brian bring a well-rounded perspective,
blending professional experience and strategic insights tailored to architects’ needs amid
evolving market conditions.

By Stacey Ruhle Kliesch, AIA, AIA NJ Advocacy Consultant | Posted in Business | Tagged: #Architecture, #BrianPenschowAIA, #businessofarchitecture, #economicforces, leadership | Comments (0)