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The Slow March Upward Continues...

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The American Institute of Architecture's Billing Index continues to show signs the economy is moving in a positive direction, from a 52.7 in July to a 53.8 in August.   This is good news for sure, and let's hope it continues.

I still see stiff competition for work in my region along with very tight budgets.  Nobody is hiring just yet, either -  at least not in any large numbers.  There's been a (literally) less than a handful of jobs posted, most of them being low-paying intern level positions.

From the AIA:


Strong Conditions Revealed in Architecture Billings Index

Increasing demand for design services fueling recovery for construction industry

For immediate release:

Washington, D.C. – September 18, 2013 – The Architecture Billings Index (ABI) showed more acceleration in the growth of design activity nationally. 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 August ABI score was 53.8, up from a mark of 52.7 in July. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.0, down from the reading of 66.4 the previous month.

“As business conditions at architecture firms have improved eleven out of the past twelve months, it is fair to say that the design professions are in a recovery mode,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “This upturn signals an impending turnaround in nonresidential construction activity, but a key component to maintaining this momentum is the ability of businesses to obtain financing for real estate projects, and for a resolution to the federal government budget and debt ceiling impasse.”

Key August ABI highlights:

• Regional averages: West (54.8), Northeast (54.4), Midwest (52.8), South (51.9)

• Sector index breakdown: mixed practice (60.1), commercial / industrial (54.8), multi-family residential (52.1), institutional (50.8)

• Project inquiries index: 63.0

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers. Read more about The Slow March Upward Continues...

Billings Index Remains Positive

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It's almost a trend... The AIA Billings Index remained positive in July.

I can say this year has been better so far than recent years.  New projects are still spotty and regional however and I'm seeing a slowdown in some regions - while locally building permits are near double what they were a year ago at this time...  Construction does remain at a depressed level when compared to before the recession and there is still really heavy competition for jobs that do present themselves.  We've been lucky in our firm during the past month in that we've landed a few jobs.  

Let's hope the upswing continues, though I fear rising mortgage rates and the end of the building season may bring a downturn.

From the AIA:


Architecture Billings Index Stays in Growth Mode
  • All buildings sectors see increasing demand for design services

     

    For immediate release:
    Washington, D.C. – July 24, 2013 – The Architecture Billings Index (ABI) remained positive again in June after the first decline in ten months in April. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the June ABI score was 51.6, down from a mark of 52.9 in May. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 62.6, up sharply from the reading of 59.1 the previous month. 

    “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “Threats to a sustained recovery include construction costs and labor availability, inability to access financing for real estate projects, and possible adverse effects in the coming months from sequestration and the looming federal debt ceiling debate.”

    Key June ABI highlights:

    • Regional averages: Northeast (55.6), South (54.8), West (51.2), Midwest (48.3)

    • Sector index breakdown: commercial / industrial (54.7), multi-family residential (54.0), mixed practice (52.4), institutional (51.8)

    • Project inquiries index: 62.6

    The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

 

Read more about Billings Index Remains Positive

ABI: Still Up

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The June ABI (Architecture Billings Index) numbers are in, and remain positive.  Not like this is a surprise given the time of year, but it's still a good sign.

On the ground, I see things are better in some places than others;  One relatively simple RFP (Request For Proposals) in a fairly rural part of a nearby Northwest state that would normally have had 5 or 6 firms vying for the work had 20.  Yet in another state, in another fairly rural area, there is lots of work.  The larger urban areas I am familiar with are not very active, with some exceptions.  Unfortunately I am in one of those areas that are not.

From the AIA:


Architecture Billings Index Stays in Growth Mode

  • All buildings sectors see increasing demand for design services

    For immediate release:
    Washington, D.C. – July 24, 2013 – The Architecture Billings Index (ABI) remained positive again in June after the first decline in ten months in April. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the June ABI score was 51.6, down from a mark of 52.9 in May. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 62.6, up sharply from the reading of 59.1 the previous month. 

    “With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “Threats to a sustained recovery include construction costs and labor availability, inability to access financing for real estate projects, and possible adverse effects in the coming months from sequestration and the looming federal debt ceiling debate.”

    Key June ABI highlights:

    • Regional averages: Northeast (55.6), South (54.8), West (51.2), Midwest (48.3)

    • Sector index breakdown: commercial / industrial (54.7), multi-family residential (54.0), mixed practice (52.4), institutional (51.8)

    • Project inquiries index: 62.6

    The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Bouncing ABI

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Well, who would of figured.  Who could have?  The May ABI bounced up by a fair margin.  It's good news - isn't it?  Or a sign of increased volatility?  I honestly don't know.  On the ground, this spring looked promising - then (by several accounts) "things just dried up".  Yet I do know some in the construction industry that are working steady again for the first time in several years - at least for now.  Was last month just a "blip"?  Or is the "blip" this month?  The long term outlook remains definitely cloudy for all. Read more about Bouncing ABI

ABI Turns Downward

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The AIA's "Architecture Billings Index" has taken a downward turn to 48.6, down from 51.9 in March.  That's a fairly significant dip, and as it is a 3 month average it is indicative of an overall slowdown.  From my perspective, I've been seeing more construction this year than in past years, but in talking to builders and suppliers the general feeling is that things started out looking promising earlier in the year, but most prospects have since dried up.   I have seen a few projects in the works coming up, but competition for them has been very high.   There are several projects coming up in our offices that are - shall we say - "on the frontier", but even those are seeing prospects beyond the immediate future are somewhat dim.

A few years can make a big difference however.  In reality, the majority of the architects that I know are unemployed or have left the profession.  A recent discussion with a former colleauge (now unemployed, not surprisingly) revealed that nearly 8 out of 10 of the people we were working with in 2007 are unemployed or no longer in architecture.  It could be that in as many years the opposite could be true, if the economy was to truly turn around.

That may be a tough row to hoe.  As for the stated reason below of difficulty to obtain financing... who's going to give money for the future offspring of a stuck pig?  Until the political climate stabilizes and the markets are released from their bondage to the Fed, growth in this economy is going to remain stunted at best.  Here's hoping for the best...

From the AIA:


Architecture Billings Index Reverts into Negative Territory for First Time in Nine Months

Difficulty in obtaining financing for construction projects continues

For immediate release:

Washington, D.C. – May 22, 2013 – After indicating increasing demand for design services for the better part of a year, the Architecture Billings Index has reversed course in April. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the April ABI score was 48.6, down from a mark of 51.9 in March. This score reflects a decrease in demand for design services (any score above 50 indicates an increase in billings) and is the lowest mark since July 2012. The new projects inquiry index was 58.5, down from the reading of 60.1 the previous month. 

“Project approval delays are having an adverse effect on the design and construction industry, but again and again we are hearing that it is extremely difficult to obtain financing to move forward on real estate projects,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “There are other challenges that have prevented a broader recovery that we will examine in the coming months if this negative trajectory continues. However, given that inquiries for new projects continue to be strong, we’re hopeful that this is just a short-term dip.”

Key April ABI highlights:

• Regional averages: South (52.6), West (50.7), Midwest (49.4), Northeast (48.2)

• Sector index breakdown: multi-family residential (52.0), institutional (50.1), commercial / industrial (49.2), mixed practice (48.6)

• Project inquiries index: 58.5

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

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March ABI Still Positive

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The March AIA Billings Index (ABI) is out, and shows a continued - though weakening - positive trend, coming in at 51.9 (a reading of less than 50 shows a decline, above 50 indicates an increase).

I haven't added one of these in a while - so let's take a look at the latest chart for the ABI, courtesy of Calculated Risk (click for a larger image):

I see a fairly healthy return to the mean in the trend line here, but on the ground I am getting mixed signals.  On the one hand, I've been seeing a rather copious amount of residential development in my area lately, albeit on the low end of the scale, mostly small single family residential and low-rent multi family apts.  On the other, I'm seeing a fair amount of belt-tightening and a distinct pull-back of government spending, and only sporadic commercial development.

Let's hope the trend continues in a positive light.

Here's the press release from the AIA:


All regions and building sectors continue to report positive business conditions

For immediate release:

Washington, D.C. – April 24, 2013 – The Architecture Billings Index (ABI) is reflecting a steady upturn in design activity. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 51.9, down from a mark of 54.9 in February. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.1, down from the reading of 64.8 the previous month.

“Business conditions in the construction industry have generally been improving over the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “But as we have continued to report, the recovery has been uneven across the major construction sectors so it’s not a big surprise that there was some easing in the pace of growth in March compared to previous months.”

Key March ABI highlights:

• Regional averages: Northeast (54.6), Midwest (53.9), South (53.6), West (51.9)

• Sector index breakdown: multi-family residential (56.9), commercial / industrial (53.5), mixed practice (53.3), institutional (50.6)

• Project inquiries index: 60.1

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

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February ABI Still Positive

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The February AIA Billings Index (ABI) is again positive for the month, with "strong growth",  From on the ground, it seems to me to be a bit of a paper tiger, as my prediction is for things to cool off here once the weather turns warm (pun intended).  I don't see this strong growth, I see a rather standard seasonal fluctuation.  We are deep in a hole, and while we aren't at the bottom we are a lot closer to it than we are to the top.

From the AIA:

  Read more about February ABI Still Positive

January ABI strong

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The AIA January Billings Index (ABI) reports increases in all sectors.  Let's hope it hangs on.

From the AIA:


Strong Surge for Architecture Billings Index 

All regions and sectors report positive business conditions

For immediate release:
Washington, D.C. – February 20, 2013 – As the prognosis for the design and construction industry continues to improve, the Architecture Billings Index (ABI) is reflecting its strongest growth since November 2007. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 54.2, up sharply from a mark of 51.2* in December. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.2, much higher than the reading of 57.9 the previous month. 

* Every January the AIA research department updates the seasonal factors used to calculate the ABI, resulting in a revision of recent ABI values.

“We have been pointing in this direction for the last several months, but this is the strongest indication that there will be an upturn in construction activity in the coming months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “But as we continue to hear about overall improving economic conditions and that there are more inquiries for new design projects in the marketplace, a continued reservation by lending institutions to supply financing for construction projects is preventing a more widespread recovery in the industry.”

Key January ABI highlights:

• Regional averages: Midwest (54.4), West (53.4), South (51.7), Northeast (50.3)

• Sector index breakdown: mixed practice (54.9), multi-family residential (54.5), commercial / industrial (52.0), institutional (50.2)

• Project inquiries index: 63.2

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.


I find this statement rather odd:  "“But as we continue to hear about overall improving economic conditions and that there are more inquiries for new design projects in the marketplace, a continued reservation by lending institutions to supply financing for construction projects is preventing a more widespread recovery in the industry.”

Given that lending institution's willingness to loan has an effect on construction spending, their reservation to do so is hardly "preventing a widespread recovery".  If the economy is strong enough, the funding will come.  That's the law of supply and demand, and is the basis of capitalism.  I for one am not seeing "overall improving economic conditions"... What I see is more in line with a reduction of the financial panic of the last few years being replaced by a sense of "so this is where we are now - let's get on with it then, and do what we can, where we can, while we still can". 

Read more about January ABI strong

Final ABI of 2012

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The AIA's Architectural Billings Index was up again for December, with a composite reading of 52 (above 50 indicates an increase - below indicates a decrease).  Again, the weakest part of the country was the West, which came in with a reading of 49.

From the AIA:


 

Final ABI for 2012 Caps Strongest Year Since 2007

More than a quarter of firms also report increases in speculative projects

By Jennifer Riskus

Architecture firms continued to report improving business conditions in December, with an Architecture Billings Index (ABI) score of 52.0. (Any score above 50 represents billings growth). While the pace of billings growth slowed slightly from November, it is still the fifth consecutive month of growth, which means eight months of 2012 showed improving business conditions, the most in one calendar year since 2007. Inquiries into new projects remained strong, and firm backlogs for the fourth quarter inched up slightly from the third quarter to an average of 4.5 months.

Business conditions continued to improve at firms in all regions of the country in December with the exception of firms in the West, which continued to struggle to recover from nearly five years of declining billings. Firms located in the Midwest reported particularly strong firm billings last month after suffering a period of softness in the middle of the year. And for the third consecutive month, firms of all specializations reported experiencing increasing firm billings. The pace of growth has slowed significantly from the middle of the year for firms with a residential specialization, but continues to improve for firms with a commercial/industrial specialization.

Employment, economic activity on the rise

The general economy continues to show improvement as well, with the latest issue of the Federal Reserve Beige Book (released Jan. 16) reporting that economic activity expanded in all districts during the previous month and a half. Consumer spending continues to increase, and even the districts affected by Hurricane Sandy have since rebounded.

Existing residential real estate activity also increased in all districts, and those districts that had unused housing inventory reported it to be declining. However, nonresidential construction is slightly weaker than residential construction, with the Boston district seeing weakening demand for commercial real estate loans. The Dallas district, on the other hand, anticipates an upturn in commercial real estate construction in 2013. And according to the Department of Labor, employment also improved in December, with nonfarm payrolls increasing by 155,000. Construction employment increased by 30,000, led in part by an increase of 13,000 employees in the construction of buildings sector. In addition, architectural services employment ticked up modestly to 157,100 in November, the most current data available.

Improving conditions spur speculative residential development

This month, the AIA asked survey panelists about the current demand for speculative projects (developer-sponsored projects without firm commitments for tenants), and how that’s changed recently in the last few years. Just over one quarter of respondents (28 percent) reported that they’re seeing more speculative projects now, while slightly fewer (26 percent) reported a decrease. The remainder reported no change. Firms located in the Midwest and West regions were most likely to report seeing more of these projects as were large firms, with 44 percent of firms with annual billings greater than $5 million reporting more speculative projects now. More firms with a residential specialization reported an uptick in these projects than firms with other specializations.

Of firms that have seen an increase in speculative projects, the most commonly cited reason was the improvement in the overall economic outlook (62 percent of respondents), followed by the pent-up demand for facilities (54 percent). Residential rental units are the speculative project increasing the most at present, followed by residential/commercial mixed-use projects and single-family residential/condos.

This month, Work on the Boards participants are saying:

• December provided some new projects which increased our backlog out at least six months. This is the best backlog we have seen since 2008.
—42-person firm in the Midwest, institutional specialization

• Contractors are getting more small jobs, but many are very budget-oriented, and are not involving architects.
—Three-person firm in the West, residential specialization

• Much of the work that made 2012 so strong may not be readily repeated in 2013. Business development will be a renewed focus.
—23-person firm in the South, commercial/industrial specialization

• Work has substantially increased over the last 12 months, with strong markets including medical research, utilities, and state-funded projects. However, reduced state revenue suggests fewer new projects next year.
—120-person firm in the Northeast, institutional specialization

 

Read more about Final ABI of 2012

More Positive News: ABI Up for 4th Month

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The AIA Billings Index (ABI) registered yet another tick in a slow slog upward.  This is good news, though as I've said before this is still a long way from being a healthy market.  From what I've been seeing on the ground, this trend is likely to reverse itself in the next month or two, let's hope I'm wrong.

From the AIA:

Architecture Billings Index Signaling Gains for Fourth Straight Month

Positive business conditions for all building sectors


For immediate release:
Washington, D.C. – December 19, 2012 – Billings at architecture firms across the country continue to increase. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 53.2, up from the mark of 52.8 in October. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.6, up slightly from the 59.4 mark of the previous month. 

“These are the strongest business conditions we have seen since the end of 2007 before the construction market collapse,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The real question now is if the federal budget situation gets cleared up which will likely lead to the green lighting of numerous projects currently on hold. If we do end up going off the ‘fiscal cliff’ then we can expect a significant setback for the entire design and construction industry.”

Key November ABI highlights:

• Regional averages: Northeast (56.3), Midwest (54.4), South (51.1), West (49.6)

• Sector index breakdown: multi-family residential (55.9), mixed practice (53.9), commercial / industrial (52.0), institutional (50.5)

• Project inquiries index: 59.6

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

 

Read more about More Positive News: ABI Up for 4th Month

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by Dr. Radut