Wednesday, January 19, 2011

AIA: Architecture Billings Index highest since December 2007

by Bill McBride on 1/19/2011 12:01:00 AM

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From the American Institute of Architects: Architecture Billings Index (ABI) for December

“On the heels of its highest mark since 2007, the Architecture Billings Index (ABI) jumped more than two points in December. ... The American Institute of Architects (AIA) reported the December ABI score was 54.2, up from a reading of 52.0 the previous month. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 62.6, up slightly from a mark of 61.4 in November.”

“This is more promising news that the design and construction industry is continuing to move toward a recovery,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. "However, historically December is the most unpredictable month from a business standpoint, and therefore the most difficult month from which to interpret a trend. The coming quarter will give us a much better sense of the strength of the apparent upturn in design activity.”
AIA Architecture Billing Index Click on graph for larger image in new window.

This graph shows the Architecture Billings Index since 1996. The index showed expansion in December (above 50) and this is the highest level since December 2007.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this indicator suggests the drag from CRE investment will end mid-year or so.

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