Wednesday, October 23, 2019

AIA: "Architecture Billings Index downturn moderates as challenging conditions continue"

by Calculated Risk on 10/23/2019 11:27:00 AM

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

From the AIA: Architecture Billings Index downturn moderates as challenging conditions continue

While architecture billings moderated in September, design activity shows signs of remaining sluggish at U.S. architecture firms, according to a new report released today from the American Institute of Architects (AIA).

The Architecture Billings Index (ABI) score in September is 49.7, which improved from the August score of 47.2. However, any score below 50 indicates a decrease in billings. During September, both the new project inquiries and design contracts scores were positive, posting scores of 59.0 and 54.4 respectively.

“Though still in negative territory, the moderating billings score along with the rebound in design contracts and inquiries serve as a continued note of caution for the industry,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Continued weakness in the larger economy still doesn’t bode well for future design services, which will likely see continued volatility in the months ahead.”
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• Regional averages: South (52.3); West (51.3); Northeast (46.3); Midwest (45.3)

• Sector index breakdown: multi-family residential (53.2); mixed practice (53.0); institutional (48.5); commercial/industrial (45.3)
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 49.7 in September, up from 47.2 in August. Anything below 50 indicates contraction 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 has been positive for 8 of the previous 12 months, suggesting some further increase in CRE investment in 2019 - but all four negative reading have been in the last 7 months, and might suggest some decline in CRE investment in 2020.