by Calculated Risk on 8/18/2021 12:44:00 PM

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

From the AIA: Demand for design activity continues to expand

The Architecture Billings Index (ABI) recorded its sixth consecutive positive month, according to a new report today from The American Institute of Architects (AIA).

The ABI score for July was 54.6. While this was down slightly from June’s score of 57.1, it still indicates very strong business conditions overall (any score above 50 indicates an increase in billings from the prior month). Scoring for new project inquiries also declined in July but remained near its all-time high at 65.0. The score for new design contracts was essentially unchanged from June to July with a score of 58.0.

“In prior business cycles, architecture firms generally saw their project work soften quickly and then recover slowly,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “So the strength of this recovery is unprecedented. Firm leaders who have leaned into this economic upturn by reinvesting in their firms by hiring staff and upgrading their technology, will likely have a better year than those that anticipated a slower recovery.”
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• Regional averages: Midwest (58.3); West (56.0); South (54.6); Northeast (54.1)

• Sector index breakdown: commercial/industrial (58.4); institutional (55.4); multi-family residential (54.7); mixed practice (54.4)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 54.6 in July, down from 57.1 in June. Anything above 50 indicates expansion 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 had been below 50 for eleven consecutive months, but has been solidly positive for the last six months.  

The eleven months of decline represented a significant decrease in design services, and suggests a decline in CRE investment through most of 2021 (This usually leads CRE investment by 9 to 12 months), however we might see a pickup in CRE investment towards the end of the 2021 and into 2022.