by Calculated Risk on 7/22/2020 02:49:00 PM

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

From the AIA: Architecture billings remain in negative territory, begin to stabilize

Demand for design services from architecture firms began to stabilize in June, following their peak declines in April, according to a new report today from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for June was 40.0 compared to 32.0 in May. The May ABI score indicates that a significant share of architecture firms still saw their billings decline from May to June, however the share reporting declines slowed significantly. Index scores for new project inquiries and new design contracts also showed signs of stabilizing, posting scores of 49.3 and 44.0 respectively.

“While business conditions remained soft at firms across the country, those with a multifamily residential specialization saw the most positive signs,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Unfortunately, conditions at firms with a commercial/industrial specialization are likely to remain weak for an extended period of time, until hospitality, office and retail facilities can fully reopen, and design demand for this space begins to increase.”
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• Regional averages [3 month average]: Midwest (36.8); West (36.8); South (35.9); Northeast (34.2)

• Sector index breakdown: multi-family residential (44.7); institutional (38.9); mixed practice (35.3); commercial/industrial (30.1)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 40.0 in June, up from 32.0 in May. 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 represents a significant decrease in design services, and suggests a decline in CRE investment in the first half of 2021 (This usually leads CRE investment by 9 to 12 months).