by Calculated Risk on 3/20/2024 10:11:00 AM

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

From the AIA: AIA/Deltek ABI Reports Moderation in the Slowdown in Business Conditions at Architecture Firms in February

Architecture firm billings continued to decline in February, with an AIA/Deltek Architecture Billings Index (ABI) score of 49.5 for the month. However, February’s score marks the most modest easing in billings since July 2023 and suggests that the recent slowdown may be receding.

“There are indicators this month that business conditions at firms may finally begin to pick up in the coming months. Inquiries into new projects grew at their fastest pace since November, and the value of newly signed design contracts increased at their fastest pace since last summer,” said Kermit Baker, PhD, AIA Chief Economist." Given the moderation of inflation for construction costs and prospects for lower interest rates in the coming months, there are positive signs for future growth.”

The Midwest as a region is still reporting billings growth, despite business conditions remaining weak across the country in February. Firms located in the Midwest reported growth for the last three months, and for four of the last five months.

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 (44.0); Midwest (50.8); South (47.7); West (47.2)

• Sector index breakdown: commercial/industrial (46.1); institutional (50.7); mixed practice (firms that do not have at least half of their billings in any one other category) (47.1); multifamily residential (44.9)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 49.5 in February, up from 46.2 in January.  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 nineteen consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.