Monday, September 21, 2009

AIA: Architectural Billings Index Declines in August

by Calculated Risk on 9/21/2009 12:14:00 PM

From Baltimore Business Journal: Architects report drop in future projects in August

... The American Institute of Architects said August’s Architectural Billings Index, an economic indicator of future construction activity, fell to 41.7 during the month, which is down from 43.1 in July.
“While there have been occasional signs of optimism over the last few months, the overwhelming majority of architects are reporting that banks are extremely reluctant to provide financing for projects and that new equity requirements and conservative appraisals are making it even more difficult for developers to get loans,” said Kermit Baker, AIA chief economist. “Until the anxiety within the financial community eases, these conditions are likely to continue.”
AIA Architecture Billing Index Click on graph for larger image in new window.

This graph shows the Architecture Billings Index since 1996. The index has remained below 50, indicating falling demand, since January 2008.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

Historically there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on commercial real estate (CRE). This suggests further dramatic declines in CRE investment through most of next year - at least.