Wednesday, February 20, 2013

AIA: "Strong Surge for Architecture Billings Index"

by Bill McBride on 2/20/2013 09:59:00 AM

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

From AIA: Strong Surge for Architecture Billings Index

As the prognosis for the design and construction industry continues to improve, the Architecture Billings Index (ABI) is reflecting its strongest growth since November 2007. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 54.2, up sharply from a mark of 51.2* in December. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.2, much higher than the reading of 57.9 the previous month.

“We have been pointing in this direction for the last several months, but this is the strongest indication that there will be an upturn in construction activity in the coming months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But as we continue to hear about overall improving economic conditions and that there are more inquiries for new design projects in the marketplace, a continued reservation by lending institutions to supply financing for construction projects is preventing a more widespread recovery in the industry.”

• Regional averages: Midwest (54.4), West (53.4), South (51.7), Northeast (50.3)

• Sector index breakdown: mixed practice (54.9), multi-family residential (54.5), commercial / industrial (52.0), institutional (50.2)
emphasis added
AIA Architecture Billing Index Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 54.2 in January, up from 51.2 in December. Anything above 50 indicates expansion in demand for architects' services.

Every building sector is now expanding and new project inquiries are strongly positive. 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. This suggests some increase in CRE investment in 2013.

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