by Calculated Risk on 6/26/2024 01:46:00 PM

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

From the AIA: ABI May 2024: Business conditions at architecture firms continue to soften

The AIA/Deltek Architecture Billings Index (ABI) score declined to 42.4 for the month, as more firms reported a decrease in billings in May than in April. In addition, there is increasing softness in the pipeline of new work coming into firms. While inquiries into new projects continued to increase, they did so at a slower pace than in recent months. And the value of new signed design contracts declined further in May, following a small decrease in April. Despite the fact that the high inflation of the last few years has largely receded, elevated interest rates continue to cause hesitation among many clients.

Firm billings remained soft across all regions and sectors as well in May. Billings declined at firms in all regions of the country for the fourth consecutive month, as conditions remained weakest at firms located in the Midwest. Business conditions also softened further in May at firms with an institutional specialization, while fewer firms with commercial/industrial and multifamily residential specializations reported a decline in billings in May than in April. However, a majority of firms of both specializations still reported weak business conditions.
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The ABI score is a leading economic indicator of construction activity, providing an approximately nine-to-twelve-month glimpse into the future of nonresidential construction spending activity. The score is derived from a monthly survey of architecture firms that measures the change in the number of services provided to clients.
emphasis added

• Northeast (47.7); Midwest (41.7); South (46.0); West (46.3)

• Sector index breakdown: commercial/industrial (48.2); institutional (43.2); multifamily residential (47.3)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 42.4 in May, down from 48.3 in April.  Anything below 50 indicates a decrease 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 index usually leads CRE investment by 9 to 12 months, so this index suggests a slowdown in CRE investment in 2024.

Note that multi-family billing turned down in August 2022 and has been negative for twenty-two consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.