Wednesday, July 19, 2017

AIA: Architecture Billings Index positive in June

by Bill McBride on 7/19/2017 09:52:00 AM

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

From the AIA: Architecture firms end second quarter on a strong note

For the fifth consecutive month, architecture firms recorded increasing demand for design services as reflected in the June Architecture Billings Index (ABI). 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 54.2, up from a score of 53.0 in the previous month. This score 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 62.4 the previous month, while the new design contracts index decreased from 54.8 to 53.7.

“So far this year, new activity coming into architecture firms has generally exceeded their ability to complete ongoing projects,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Now, firms seem to be ramping up enough to manage these growing workloads.”
...
• Regional averages: South (54.8), West (53.1), Midwest (51.9), Northeast (51.5)

• Sector index breakdown: multi-family residential (57.1), mixed practice (53.8), institutional (52.6), commercial / industrial (52.1)
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 54.2 in June, up from 53.0 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.