Carpe Diem

Architecture billings indexes back to pre-recession levels

abiFrom the American Institute of Architects:

“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 (see red line in chart). 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 (and highest since July 2007).”

“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.”

MP: Both the billings index for commercial real estate construction and the new project inquiry index are at five-year highs and back to their pre-recession 2007 levels, suggesting that the commercial real estate market will continue to improve in 2013.  See a related post from Scott Grannis on the “impressive” commercial real estate recovery.


8 thoughts on “Architecture billings indexes back to pre-recession levels

  1. Good to see these things moving up.

    To put a dollar value on things, Commercial Construction in all of 2012 totaled $44.1 billion, a gain of 10.3% from 2012. Annual Construction is now at a 32-month high with additional gains ahead in 2013. While the current level is still 50.1% below the pre-recession peak, it is a gain of 22.8% from the recessionary low. To be sure, this market still has a long way to go, but the fact this market is improving is undeniable.

    • “this market is improving is undeniable”…

      While I agree Americans are spending more on housing, I’m not convinced this is a positive sign. For instance, do you think the run-up to 2007-08 was an improvement? Or an unsustainable bubble? In the long run, was it good that we had a hot bull followed by a cold bear?

      • Not talking about housing here. Talking about commercial construction.

        But you also can’t jump at every price increase as a bubble. You need to look at the overall conditions of the market: what are the vacancy rates, how are inventories, what are the costs, what are lending conditions looking like, what do historical trends look like, that sort of thing. I am unable to say with certainty whether or not I would have called Housing a bubble in the run up to the recession: I was still in high school and didn’t even know what economics was. The current growth trends in both Housing and Commercial Construction are within normal bounds and above the rate of inflation, suggesting the dollar value gained is not due to rising prices. People like to point to the high rates of growth and cry “bubble!” but I remind you these are industries that fell by 60% (Commercial) and 73% (Housing) during the recession. So they are coming off deep lows.

        Banks have reigned in their lending and record low interest rates have had a muted effect on home construction and commercial construction. This is not a re-inflating of a bubble.

  2. The question is how much of this recovery is due to heavily medicated money by the central bank. Speculators have really dived head first into the market (hegde funds/private equity). Blackstone is now the largest investor in single-family homes to manage as rentals. I’m not excited.

    • My two cents is the transforming of single-family homes to rentals is a good thing. It helps us transition through the backlog of vacant housing and foreclosures without greatly heaping the debt burden onto individuals.

      • My two cents is the transforming of single-family homes to rentals is a good thing. It helps us transition through the backlog of vacant housing and foreclosures without greatly heaping the debt burden onto individuals.

        At the same time providing housing for those who have lost their homes for whatever reason.

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