by calculated risks 1/25/2023 10:06:00 AM
Note: This indicator is mainly a leading indicator for investment in new commercial real estate (CRE).
From the AIA: Architecture bills continue to come down
Demand for design services from US architecture firms continued to contract in December, according to a new report from the American Institute of Architects (AIA).
The pace of decline during December slowed from November, the publication The Billings Architecture Index (ABI) has a score of 47.5 out of 46.6 (any score below 50 indicates a decrease in fixed billing). Inquiries for new projects posted a positive score of 52.3, however new design contracts remained in negative territory with a score of 49.4.
“Despite strong revenue growth last year, architecture firms have a modest outlook regarding business conditions in the coming year,” said AIA Chief Economist Kermit Baker, Ph.D., Hon. aia. “wWith ABI’s results for the entire fourth quarter of 2022 in negative territory, a slowdown in construction activity is expected later this year.although the depth of the contraction remains unclear.”
• Regional averages: Midwest (49.4); south (48.6); northeast (46.5); West (45.5)
• Distribution of the sectoral indicator: mixed practice (54.8); institutional (47.3); commercial/industrial (45.2); multi-family housing (44.3)
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This graph shows the Architectural Bills Index since 1996. The index was at 47.5 in December, up from 46.6 in November. Anything below 50 indicates a contraction in demand for architects’ services.
Note: This includes commercial and industrial facilities such as hotels and office buildings, multi-family housing, as well as schools, hospitals and other institutions.
This indicator has been positive for 20 consecutive months but has indicated a decline in the past three months. Typically led by CRE investment 9-12 months, this index therefore indicates an increase in investment in CRE in early 2023, but a slowdown in investment in CRE later in 2023.
Note that multifamily billing was declined in september and has been negative for four consecutive months and at the lowest level since May 2020. This suggests that we will see a decline in multiple family starts sometime in 2023 (multiple family starts may have already peaked).