by Calculated Risk on 8/19/2020 12:27:00 PM

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

From the AIA: July architectural billings remained stalled

Architectural billings failed to show any progress during July, and business conditions continued to be soft at firms, according to a new report from the American Institute of Architects (AIA).

The pace of decline during July remained at about the same level as in June with both months posting an ABI score of 40.0 (any score below 50 indicates a decline in firm billings). While firms reported a modest decline for inquiries into new projects—slipping from 49.3 in June to 49.1 in July— newly signed design contracts declined more critically, falling from a June level of 44.0 to 41.7 in July.

“It’s clear the pandemic continued to contribute to uncertainty in business conditions, especially as cases spiked in states across the country,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “While clients expressed interest in exploring new projects, many are hesitant to sign onto new contracts with the exception of the multifamily residential sector, which came close to seeing billings growth in July.”
...
• Regional averages: West (40.9); South (40.7); Midwest (40.1); Northeast (36.8)

• Sector index breakdown: multi-family residential (47.5); mixed practice (44.0); institutional (39.5); commercial/industrial (35.4)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 40.0 in July, unchanged from 40.0 in June.. 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 index has been below 50 for five consecutive months.  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).

This weakness is not surprising since certain segments of CRE are struggling, especially offices and retail.