by Bill McBride on 7/20/2016 09:55:00 AM
Wednesday, July 20, 2016
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Architecture Billings Index remains on solid footing
Buoyed by increasing levels of demand across all project types, the Architecture Billings Index (ABI) was positive in June for the fifth consecutive month. 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 June ABI score was 52.6, down from the mark of 53.1 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, down from a reading of 60.1 the previous month.Note that multi-family has picked up again, so we might see another pickup in multi-family starts.
“Demand for residential projects has surged this year, greatly exceeding the pace set in 2015. This suggests strong future growth for housing in the coming year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “While we expect to see momentum continue for the overall design and construction industry in the months ahead, the fact that the value of design contracts dipped into negative territory in June for the first time in more than two years is something of a concern.”
• Regional averages: South (55.5), West (54.1), Northeast (51.8), Midwest (48.2)
• Sector index breakdown: multi-family residential (57.9), institutional (52.7), mixed practice (51.0), commercial / industrial (50.3)
Click on graph for larger image.
This graph shows the Architecture Billings Index since 1996. The index was at 52.6 in June, down from 53.1 in May. 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. This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment through mid-2017.
Posted by Bill McBride on 7/20/2016 09:55:00 AM