FAYETTEVILLE, ARK. — The American Institute of Architects’ (AIA) Architecture Billings Index (ABI) is now above 50 — the benchmark for growth in design activity — marking the first monthly increase since January 2008. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was also up sharply, moving from 54.6 to 62.3 — the highest mark since July 2007. A leading economic indicator of construction activity, the ABI reflects the approximate nine- to 12-month lag time between architecture billings and construction spending.
To represent sustainable growth for the industry, the ABI needs to score consistently above 50 for a handful of months, which Kermit Baker, chief economist with the AIA, thinks will likely happen.
Since the beginning of the year, the ABI has displayed erratic behavior, edging north early in the year only to drop in the spring before starting a steady recovery in June, with scores always moving forward but never breaking the psychological barrier represented by the number 50.
Baker has predicted the ABI to break 50 for months, only to see the index fall short of expectations. But with the positive trend started in June and September’s 50.4 score, Baker is now sounding more upbeat.
While the institutional sector remains weak (the score in September was 47.9), the commercial and industrial sector is leading the recovery with a 56.3 score. Multi-family housing (the ABI doesn’t track single homes), sat at 47 in September, and mixed practice at 44.2.
Baker said the trends represent a "traditional economic recovery unfolding." During the recovery phase, commercial markets respond faster than institutional markets, which is the opposite of what happens at the beginning of a recession, where commercial falls first.
By regions, the Northeast is leading by far, with a score of 56.7 in September, followed by the Midwest, with a score of 50. The West is the worst-off region, with a score of only 44.5.
Since most A/E/P and environmental consulting firms are small, Baker believes the recently passed Small Business Jobs Act "will be helpful" in stimulating a recovery for the sector.
However, "what’s going to help architecture firms is more construction activity," he said. "There are a lot of unemployed architects out there looking for work."
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