Wednesday, May 24, 2017

AIA: Architecture Billings Index positive in April

by Bill McBride on 5/24/2017 11:18:00 AM

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

From the AIA: Design billings increasing entering height of construction season

After beginning the year with a marginal decline, the Architecture Billings Index has posted three consecutive months of growth in design revenue at architecture firms. 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 April ABI score was 50.9, down from a score of 54.3 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 60.2, up from a reading of 59.8 the previous month, while the new design contracts index increased from 52.3 to 53.2.

“Probably even better news for the construction outlook is that new project work coming into architecture firms has seen exceptionally strong growth so far this year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “In fact, new project activity has pushed up project backlogs at architecture firm to their highest level since the design market began its recovery earlier this decade.”
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• Regional averages: South (55.3), Midwest (53.3), West (50.9), Northeast (50.7)

• Sector index breakdown: institutional (54.0), mixed practice (53.4), commercial / industrial (52.4), multi-family residential (49.9)
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 50.9 in April, down from 54.3 the previous month. 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 in 2017 and early 2018.