Wednesday, February 17, 2016

AIA: "Slight Contraction in Architecture Billings Index "

by Bill McBride on 2/17/2016 11:44:00 AM

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

From the AIA: Slight Contraction in Architecture Billings Index

Following a generally positive performance in 2015, the Architecture Billings Index has begun this year modestly dipping back into negative terrain. 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 January ABI score was 49.6, down slightly from the mark of 51.3 in the previous month. This score reflects a minor decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 55.3, down from a reading of 60.5 the previous month.

“The fundamentals are mostly sound in the nonresidential design and construction market,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “January was a rocky month throughout the economy, with falling oil prices, international economic concerns, and with steep declines in stock market valuations in the U.S. and elsewhere. Some of the fallout of this uncertainty may have affected progress on design projects.”
• Regional averages: West (50.8), Northeast (50.4), South (50.3), Midwest (48.9)

• Sector index breakdown: multi-family residential (51.9), commercial / industrial (50.5), institutional (49.9), mixed practice (49.0)
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 49.6 in January, down from 51.3 in December. 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.

The multi-family residential market was negative for most of last year - suggesting a slowdown or less growth for apartments - but has been positive for the last four months.

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 8 of the last 12 months, suggesting a further increase in CRE investment in 2016.