Wednesday, August 20, 2014

AIA: Architecture Billings Index increased in July, "Highest Mark Since 2007"

by Bill McBride on 8/20/2014 09:59:00 AM

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

From AIA: Architecture Billings Index Reaches Highest Mark Since 2007

The last three months have shown steadily increasing demand for design services and the Architecture Billings Index (ABI) is now at its highest level since 2007. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI score was 55.8, up noticeably from a mark of 53.5 in June. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 66.0, following a very strong mark of 66.4 the previous month.

The AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in July was 54.9.

“Business conditions for the design and construction marketplace, and those industries associated with it, appear to be well-positioned for continued growth in the coming months,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The key to a more widespread boost in design activity continues to be the institutional sector which is starting to exhibit signs of life after languishing for the better part of the last five-plus years.”

• Regional averages: Northeast (55.5), South (55.1), Midwest (54.1), West (53.5) [three month average]
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 55.8 in July, up from 53.5 in June. Anything above 50 indicates expansion 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 readings over the last year suggest an increase in CRE investment this year and in 2015.