Wednesday, June 18, 2014

AIA: Architecture Billings Index increased in May

by Calculated Risk on 6/18/2014 10:12:00 AM

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

From AIA: Three Point Jump for Architecture Billings Index

On the heels of consecutive months of decreasing demand for design services, the Architecture Billings Index (ABI) has returned to positive territory. 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 May ABI score was 52.6, up sharply from a mark of 49.6 in April. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.2, up from the reading of 59.1 the previous month.

The AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in May was 52.5.

“Volatility continues to be the watchword in the design and construction markets, with firms in some regions of the country, and serving some sectors of the industry, reporting strong growth, while others are indicating continued weakness,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, overall, it appears that activity has recovered from the winter slump, and design professions should see more positive than negative numbers in the coming months.”

• Regional averages: South (58.1), Midwest (51.3), Northeast (47.6) , West (46.9) [three month average]
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 52.6 in May, up from 49.6 in April. Anything above 50 indicates expansion in demand for architects' services.  This index has indicated expansion during 17 of the last 22 months.

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.  The index has been moving sideways near the expansion / contraction line recently.  However, the readings over the last year suggest some increase in CRE investment in 2014.