Institutional and Mixed-Practice Sectors Signal Resilience Amid US Architecture Index Downturn

The US Architecture Billings Index (ABI) dipped to 43.2 in May 2025, marking its lowest reading in over a year and underscoring persistent economic headwinds. Yet beneath the surface, a nuanced picture emerges: while commercial and residential sectors falter, institutional and mixed-practice architectural firms are demonstrating remarkable resilience. These trends suggest a strategic opportunity for investors to pivot toward sectors tied to public infrastructure and diversified project pipelines.

Sector-Specific Dynamics
The commercial/industrial sector, which includes office towers and retail developments, posted an ABI of 40.5—its weakest performance in over two years. Multifamily residential also lagged at 40.8, reflecting prolonged affordability pressures. In contrast, institutional projects—such as schools, hospitals, and sustainable infrastructure—held up better, with an ABI of 46.3. Mixed-practice firms (those not specializing in a single sector) outperformed all others at 47.6, highlighting the value of diversification in uncertain times.

The decline in new project inquiries to 48.0—a three-month low—signals caution among clients. However, the institutional and mixed sectors' relative strength suggests demand for projects insulated from market volatility, such as public infrastructure and green energy initiatives. These areas often benefit from federal funding or long-term planning cycles, offering a buffer against rising interest rates and inflation.

This visual will illustrate the steady decline since late 2024, with institutional and mixed-sector sub-indexes outperforming commercial and residential.

The Case for Sustainable Infrastructure
Sustainable infrastructure projects—often categorized under institutional or mixed sectors—are a standout bright spot. While the ABI data does not explicitly track sustainability metrics, the resilience of institutional firms aligns with federal pushes for climate-resilient projects and renewable energy investments. The Inflation Reduction Act of 2022 and state-level green bonds have created demand for architects specializing in smart grids, public transit, and net-zero buildings.

The South's strong regional performance (46.2) further supports this narrative, as states like Texas and Florida accelerate investments in renewable energy and flood-resistant infrastructure. Meanwhile, the Northeast's slump (40.2) reflects its reliance on commercial real estate, which continues to struggle.

Investment Implications
For investors, the data points to two clear strategies:

1. Target institutional and mixed-practice architecture firms: Look for companies with expertise in sustainable infrastructure, public transit, or healthcare facilities. Firms such as HDR, Inc. (which handles large-scale infrastructure) or Stantec Inc. (specializing in renewable energy) could benefit from this trend.

2. Consider ETFs tied to infrastructure and public projects: The SPDR S&P Infrastructure ETF (XINF) provides exposure to construction and engineering firms involved in government-backed projects, while the iShares Global Green Energy ETF (ICLN) highlights renewable energy opportunities.

Cautions and Context
While institutional sectors show relative strength, all ABI components remain below the 50 threshold, indicating contraction across the board. The prolonged decline in design contracts (43.3) underscores that new project approvals are still sluggish. Investors should pair sector-specific bets with a long-term horizon, as recovery timelines hinge on interest rate cuts and inflation trends.

Conclusion
The May ABI paints a challenging landscape for the architectural sector overall, but it also reveals pockets of resilience. By focusing on institutional and mixed-practice firms—particularly those aligned with sustainable infrastructure—investors can position themselves for growth as public and diversified projects outpace their private-sector counterparts. As the saying goes, in downturns, diversification isn't just a strategy—it's survival.

For further analysis, track the ABI's institutional and mixed-sector sub-indexes monthly to gauge recovery momentum.