Wednesday, October 21, 2015

AIA: Strong Rebound for Architecture Billings Index in September

by Bill McBride on 10/21/2015 10:17:00 AM

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

From the AIA: Strong Rebound for Architecture Billings Index

The Architecture Billings Index (ABI) returned to positive territory after a slight dip in August, and has seen growth in six of the nine months of the year so far. 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 September ABI score was 53.7, up from a mark of 49.1 in August. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.0, down from a reading of 61.8 the previous month.

“Aside from uneven demand for design services in the Northeast, all regions are project sectors are in good shape,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Areas of concern are shifting to supply issues for the industry, including volatility in building materials costs, a lack of a deep enough talent pool to keep up with demand, as well as a lack of contractors to execute design work.”
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• Regional averages: South (54.5), Midwest (54.2), West (51.7) Northeast (43.7)

• Sector index breakdown: mixed practice (52.6), institutional (51.5), commercial / industrial (50.9) multi-family residential (49.5)

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 53.7 in September, up from 49.1 in August. 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.

The multi-family residential market was negative for the eighth consecutive month - and this might be indicating a slowdown for apartments - or at least less growth.

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 index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment over the next 12 months.