Wednesday, June 24, 2020

AIA: "Architecture billings downward trajectory moderates"

by Calculated Risk on 6/24/2020 09:06:00 AM

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

From the AIA: Architecture billings downward trajectory moderates

Demand for design services in May saw few signs of rebounding following a record drop in billings the month prior, according to a new report today from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for May was 32.0 compared to 29.5 in April, but still represents a significant decrease in services provided by U.S. architecture firms (any number below 50 indicates a decrease in billings). In May, the decline in new project inquiries and design contract scores moderated from April, posting scores of 38.0 and 33.1 respectively.

“A large portion of the design and construction industry remains mired in steep cutbacks as many businesses and organizations are still trying to figure out what actions make sense in this uncertain economic environment,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “There are growing signs of activity beginning to pick up in some areas, but others are seeing a pause as pandemic concerns continue to grow.”
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• Regional averages: West (36.0); South (30.6); Midwest (29.7); Northeast (25.1)

• Sector index breakdown: institutional (35.7); multi-family residential (34.8); mixed practice (28.5); commercial/industrial (24.8)
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 32.0 in May, up from 29.5 in April. 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.

This represents a significant decrease in design services, and suggests a decline in CRE investment in early 2021 (This usually leads CRE investment by 9 to 12 months).