by Calculated Risk on 5/22/2024 03:48:00 PM

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

From the AIA: ABI April 2024: Pace of billings decline at architecture firms slows slightly

While the AIA/Deltek Architecture Billings Index (ABI) score for the month rose from 43.6 in March to 48.3 in April, it indicates that billings continued to decline at the majority of firms (a score below 50 indicates declining billings). Inquiries into new projects continued to increase, as there remains interest in starting new projects. However, the value of newly signed design contracts dipped slightly in April, as clients remain hesitant to commit to new work. Firms had hoped that the Federal Reserve would start lowering interest rates this spring and that would open new work, but with that decrease now likely on hold until late summer or early fall, firms may have some more slow months ahead of them.

Architecture firm billings continued to decline at firms in all regions of the country in April as well, with firms located in the Midwest and South reporting the largest declines. The current longest duration of decline is found at firms located in the West, where billings have now declined for the last 19 consecutive months. Business conditions also remain soft at firms of all specializations, with the weakest conditions continuing at firms with a multifamily residential specialization, followed by those with an institutional specialization, and then those with a commercial/industrial 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 (56.9); Midwest (44.2); South (44.6); West (47.8)

• Sector index breakdown: commercial/industrial (47.4); institutional (46.1); multifamily residential (45.6)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 48.3 in April, up from 43.6 in March.  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 one consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.