In another sign of improvement in commercial real estate the Calculated Risk blog in a recent posting notes a continuing increase in the AIA Architecture Billings Index. When architects get busier that usually indicates an increase in new construction is not far behind.
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Architecture Billings Index Continues to Improve at a Healthy Pace
With increasing demand for design services, the Architecture Billings Index (ABI) is continuing to strengthen. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 54.9, up slightly from a mark of 54.2 in January. This score reflects a strong increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 64.8, higher than the reading of 63.2 the previous month – and its highest mark since January 2007.
“Conditions have been strengthening in all regions and construction sectors for the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Still, we also continue to hear a mix of business conditions in the marketplace as this hesitant recovery continues to unfold.”
• Regional averages: Northeast (56.7), Midwest (54.7), West (54.7), South (52.7)
• Sector index breakdown: multi-family residential (60.9), mixed practice (56.9), commercial / industrial (53.3), institutional (50.7)
This graph shows the Architecture Billings Index since 1996. The index was at 54.9 in February, up from 54.2 in January. Anything above 50 indicates expansion in demand for architects’ services.
Every building sector is now expanding and new project inquiries are strongly positive (highest since January 2007). Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an “approximate nine to twelve month lag time between architecture billings and construction spending” on non-residential construction. This index has been positive for seven consecutive months and suggests some increase in CRE investment in the second half of 2013.