Are you worried about another recession?

KB: We’ve been publishing the Architecture Billings Index, a leading indicator for construction, for nearly 25 years. It’s based on a monthly survey of architects, and we do a fair amount of statistical analysis to determine what responses tell us about the industry.

We’ve seen some volatility in our index this year. In fact, March 2019 showed the biggest decline in six or seven years. It’s generating a lot of concern. So, is this suggestive of a slowdown in construction activity? To answer that question, we looked at the current landscape as well as the two most recent recessions in 2008–09 and 2001.

Ultimately, it doesn’t look like the next 18 to 24 months will compare to what we went through in 2008–09. That was the most significant downturn most people will see in their professional lives.

On the other hand, the 2001 downturn, mostly due to the dotcom bubble burst, was not too dramatic for design and construction, so it may be a better model of what to expect next for our industry.

The good news is that, at least based on what we’ve seen thus far, the immediate future shouldn’t mirror even a modest recession.

On the construction side, we just don’t see the same market conditions that we saw with prior recessions. We aren’t seeing overbuilding — the level of construction hasn’t ramped up like before. Rents aren’t getting out of line, and vacancy rates aren’t beyond normal levels. The market conditions are much more measured. There isn’t a fundamental imbalance between what we need and what we have out there.

This all may be partly due to the fact that we just aren’t building as much. Overall, there’s less speculative construction with the hope for future growth. But I think we’re just in a different economic situation than before. In fact, if you talk to contractors, they’ll say their biggest concern is getting labor to build. That actually provides natural restraint from overbuilding.

What are other crucial issues for the construction industry, design professionals and businesses?

KB: Some of the key issues include economic cycles, regional trends and labor. The current economic cycle is winding down, and the housing market has already begun to slow in many areas of the country. According to the AIA Work-on-the-Boards survey, 62.3% of clients concerned about the economy are putting the brakes on projects.

Many architecture firms are seeing erratic business conditions. Still, those same firms are seeing growing workloads and backlogs — in fact, these backlogs are at their highest post-recession level (AIA Architecture Billings Index 2019).

Meanwhile, labor shortages are constraining industry growth. The construction force lost 2 million workers during the last downturn and has only gained back a fraction of that (JCHS tabulations of U.S. Census Bureau, American Community Survey). In confronting staffing shortages, firms are only making modest progress.

For many firms, growth will come from outside of traditional domestic markets. We’re seeing a disproportionate share of design opportunities outside of the U.S., with the Asia Pacific region accounting for 52% of global construction spending (IHS Markit Global Construction Outlook).

What must marketing and business leaders in the home and building category do to be successful?

KB: I think we’re beginning to see how globally interconnected most businesses are in terms of international economics and politics. If you’re a marketing or business leader, you should really be thinking about how you build your products.

In addition, it’s important to be concerned about environmental sustainability and stewardship. How can you use your resources more efficiently? How can you make your buildings more sustainable in the face of growing challenges?