Wednesday, November 19, 2008

AIA Architecture Billings Index hits all-time low

There's no way to sugarcoat it, folks, the architecture portion of the AEC industry is in deep trouble. This morning's news that the AIA's Architecture Billings Index hit its lowest level since the survey began in 1995 is a major blow to anyone's short-term visions of a quick turnaround.

While some quarters believe that President-Elect Barack Obama will push an agenda of addressing America's infrastructure, fact is, it will be two more months before he even takes office and perhaps much longer than that before bills are introduced into Congress, debated, signed into law, and then funding appropriated for them.

And because the index is a leading indicator of construction activity, the ABI shows an approximate nine- to 12-month lag time between architecture billing and construction spending. This means that we shouldn't expect to see much construction activity for the bulk of 2009.

The October ABI rating was 36.2, down significantly from the 41.4 mark in September (any score above 50 indicates an increase in billings). The September number was a six-point drop from August, so the trends are headed in the wrong direction. The inquiries for new projects score was 39.9, also a historic low point.

“Until recently, the institutional sector had been somewhat insulated from the deteriorating conditions affecting the commercial and residential markets,” said AIA Chief Economist Kermit Baker. “Now we are seeing that governments and nonprofit agencies are having difficulties getting bonds approved to finance large scale education and healthcare facilities, furthering the weak conditions across the construction industry.”

Regionally, the ABI breaks down as follows: Northeast (44.3), South (40.0), Midwest (37.4), and West (34.9). Sector by sector, the ABI breaks down accordingly: mixed practice (45.1), institutional (42.1), commercial / industrial (33.6), and multi-family residential (34.2).

The breakdowns show that there really aren't bright spots right now for architecture firms, unfortunately. Perhaps the November election will at least spur some activity in November, which will be reflected in the December numbers.


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