by Calculated Risk on 9/18/2024 11:51:00 AM

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

From the AIA: Architecture firm billings remained sluggish in August, as the AIA/Deltek Architecture Billings Index (ABI) score declined to 45.7

It has now been nearly two years since firms saw sustained growth. However, clients are still expressing interest in new projects, as inquiries into work have continued to increase during that period. However, those inquiries remain challenging to convert to actual new projects in the pipeline, as the value of newly signed design contracts declined for the fifth consecutive month in August.

Business conditions softened in all regions of the country in August, with firms located in the West reporting the softest conditions for the second consecutive month. Billings were flat at firms located in the Northeast for the previous two months but dipped back into negative territory again this month. Firms of all specializations also saw declining billings in August, with conditions remaining particularly soft at firms with a multifamily residential specialization.
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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 (48.2); Midwest (46.6); South (46.8); West (45.7)

• Sector index breakdown: commercial/industrial (46.6); institutional (47.4); multifamily residential (44.0)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 45.7 in August, down from 48.2 in July.  Anything below 50 indicates a decrease in demand for architects' services.

This index has indicated contraction for 22 of the last 23 months.

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 into 2025.

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