by Calculated Risk on 11/20/2024 12:35:00 PM

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

From the AIA: ABI October 2024: Business conditions at architecture firms begin to moderate

The AIA/Deltek Architecture Billings Index (ABI) score for the month was 50.3, meaning that the share of firms that reported declining billings was essentially equal to the share of firms that reported increasing billings. In addition, inquiries into new projects ticked up in October to the highest level in six months. However, despite declining interest rates and softening inflation, clients remain hesitant to start new projects. The value of newly signed design contracts softened further in October, as they declined for the seventh consecutive month. Responding firms this month indicated that many clients were still awaiting the outcomes of the November elections, at both a national and more local level, before determining how to proceed on new projects.

Business conditions varied significantly across the country in October. While firms located in the Northeast saw billings decline further from September, firms located in the South reported billings growth for the first time in two years. And while billings continued to decline at firms located in the Midwest and West, the pace of the decline in those regions slowed from recent months. Conditions also varied at firms of different specializations this month. Firms with an institutional specialization saw slight billings growth for the first time since January, while business conditions remained softer at firms with multifamily residential and commercial/industrial specializations.
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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 (45.6); Midwest (46.9); South (52.1); West (47.6)

• Sector index breakdown: commercial/industrial (47.0); institutional (50.5); multifamily residential (45.6)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 50.3 in October, up from 45.7 in September.  Anything above 50 indicates an increase in demand for architects' services.

This index has indicated contraction for 23 of the last 25 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-seven consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.