Wednesday, October 19, 2011

AIA: Architecture Billings Index declined in September

by Bill McBride on 10/19/2011 11:07:00 AM

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

From AIA: Another Drop for Architecture Billings Index

Following the first positive score in four months, the Architecture Billings Index (ABI) reversed direction again in September. ... The American Institute of Architects (AIA) reported the September ABI score was 46.9, following a score of 51.4 in August. This score reflects a sharp decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 54.3, down from a reading of 56.9 the previous month.

“It appears that the positive conditions seen last month were more of an aberration,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The economy is weak enough at present that design activity is bouncing around more than usual; one strong month can be followed by a weak one. The economy needs to be stronger to generate sustained growth in design activity.”
AIA Architecture Billing Index Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index declined to 46.9 in September from 51.4 in August. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, 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 the recent contraction suggests further declines in CRE investment in 2012.