AIA: Architecture Billings Index shows slower expansion in October - InvestingChannel

AIA: Architecture Billings Index shows slower expansion in October

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

From AIA: Pace of Demand Slows Slightly, but Positive Outlook for Architecture Billings Index Continues

Headed by the continued strength in the multi-family residential market and the emerging growth for institutional projects, demand for design services continues to be healthy as exhibited 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 October ABI score was 53.7, down from a mark of 55.2 in September. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 62.7, following a mark of 64.8 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 October was 56.4.

Though it has been slow in emerging, we’re finally seeing some momentum develop in design activity for nonprofits and municipal governments, and as such we’re seeing a new round of activity in the institutional sector,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “It will be interesting to see if and how the results of the mid-term Congressional and gubernatorial elections impact this developing momentum.”

• Regional averages: South (58.4), West (56.1), Midwest (54.4), Northeast (47.0) [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 53.7 in October, down from 55.2 in September. 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 positive readings over the last six months suggest an increase in CRE investment in 2015.

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