Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Architecture Billings Index Shows Robust Conditions Ahead for Construction Industry
With all geographic regions and building project sectors showing positive conditions, there continues to be a heightened level of demand for design services signaled in the latest Architecture Billings Index (ABI). 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 September ABI score was 55.2, up from a mark of 53.0 in August. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, following a mark of 62.6 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 August was 56.8.
“Strong demand for apartment buildings and condominiums has been one of the main drivers in helping to keep the design and construction market afloat in recent years,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “There continues to be a healthy market for those types of design projects, but the recently resurgent Institutional sector is leading to broader growth for the entire construction industry.”
• Regional averages: South (55.3) , Midwest (55.1), West (54.2), Northeast (51.0) [three month average]
emphasis added
Click on graph for larger image.
This graph shows the Architecture Billings Index since 1996. The index was at 55.2 in September, up from 53.0 in August. Anything above 50 indicates expansion 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. So the readings over the last year suggest an increase in CRE investment this year and in 2015.