Wednesday, August 17, 2016

AIA: Architecture Billings Index "moderates slightly, remains positive" in July

by Bill McBride on 8/17/2016 11:25:00 AM

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

From the AIA: Architecture Billings Index moderates slightly, remains positive

The Architecture Billings Index (ABI) was positive in July for the sixth consecutive month, and tenth out of the last twelve months as demand across all project types continued to increase. 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 51.5, down from the mark of 52.6 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 57.5, down from a reading of 58.6 the previous month.

“The uncertainty surrounding the presidential election is causing some funding decisions regarding larger construction projects to be delayed or put on hold for the time being,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “It’s likely that these concerns will persist up until the election, and therefore we would expect higher levels of volatility in the design and construction sector in the months ahead.”
...
• Regional averages: South (56.9), Midwest (50.1), Northeast (49.3), West (49.2)

• Sector index breakdown: multi-family residential (55.2), institutional (50.7), mixed practice (50.5), commercial / industrial (50.3)
emphasis added
Note that multi-family has picked up again, so we might see another pickup in multi-family starts.

AIA Architecture Billing Index Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.5 in July, down from 52.6 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.  This index was positive in 10 of the last 12 months, suggesting a further increase in CRE investment through mid-2017.