Wednesday, November 18, 2020

AIA: "Architecture billings remained stalled in October"

by Calculated Risk on 11/18/2020 10:37:00 AM

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

From the AIA: Architecture billings remained stalled in October

While architectural billings failed to show much progress during October, signs of improving business conditions at firms have emerged, according to a new report from the American Institute of Architects (AIA).

The pace of decline during October remained at about the same level as in September, posting an ABI score of 47.5 (any score below 50 indicates a decline in firm billings). Meanwhile, firms reported a modest increase in new project inquiries—growing from 57.2 in September to 59.1 in October—and newly signed design contracts jumped into positive territory for the first time since the pandemic began, with a score of 51.7.

“Though still in negative territory, the moderating billings score along with the rebound in design contracts and inquiries provide some guarded optimism,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The pace of recovery will continue to vary across regions and sectors.”
...
• Regional averages: West (50.4); Midwest (49.4); South (45.8); Northeast (44.9)

• Sector index breakdown: multi-family residential (55.1); mixed practice (52.7); commercial/industrial (48.0); institutional (42.2)
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 47.5 in October, up from 47.0 in September. 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 index has been below 50 for eight consecutive months.  This represents a significant decrease in design services, and suggests a decline in CRE investment through the first half of 2021 (This usually leads CRE investment by 9 to 12 months).

This weakness is not surprising since certain segments of CRE are struggling, especially offices and retail.