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Wednesday, June 22, 2011

AIA: Architecture Billings Index indicates declining demand in May

by Calculated Risk on 6/22/2011 12:15:00 AM

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

From the WSJ: Momentum Gone in Design Services

The Architecture Billings Index decreased again last month, dropping to 47.2 during May from 47.6 in the previous month [according to the American Institute of Architects (AIA)].
"Whatever positive momentum that there had been seen in late 2010 and earlier this year has disappeared," said Kermit Baker, chief economist of the American Institute of Architects.
AIA Architecture Billing Index Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index decreased in May to 47.2 from 47.6 in April. Anything below 50 indicates a decrease in billings.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, 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. So this suggests another dip in CRE investment towards the end of this year - and into 2012.