by Risk calculated on 24/05/2023 12:38:00
Note: This index is a leading indicator mainly for new investments in Commercial Real Estate (CRE).
From the AIA: AIA/Deltek Architecture Billing Index Reflects Continued Weak April Business Conditions
Architectural firms reported a slight drop in April billings. However, there has been an uptick in inquiries about future project activities, according to a report released today by the American Institute of Architects (AIA).
Billing score for March fell from 50.4 in March to 48.5 in April (Any score below 50 indicates a decrease in outright billings). However, companies reported that new project inquiries picked up slightly to 53.9, while most companies continued to report a decline in the value of new design contracts, with a score of 49. ,8.
“The continued weakness in design activity at architectural firms reflects client concerns about the economic outlook,” said AIA Chief Economist Kermit Baker Hon. AIA, Ph.D. “High construction costs, extended project schedules, high interest rates and increasing difficulty in obtaining financing are all weighing on the construction market.”
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• Regional averages: Midwest (51.2); West (49.3); South (48.7); Northeast (47.2)• Breakdown by sector index: mixed practice (companies not having at least half of their billings in another category) (52.1); commercial/industrial (51.8); institutional (50.6); multi-family residential (41.5)
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This chart shows the Billings Architecture Index since 1996. The index was 48.5 in April, down from 50.4 in March. Any number below 50 indicates a decrease in demand for architectural services.
Note: This includes commercial and industrial facilities such as hotels and office buildings, multi-family residences, as well as schools, hospitals and other institutions.
This index has declined in 6 of the last 7 months. This index typically precedes CRE investment by 9-12 months, so this index suggests a slowdown in CRE investment later in 2023 and 2024.
Note that multi-family billing was declined in July 2022 and has been negative for TEN consecutive months. At 41.5, this was the weakest reading for multifamily since the pandemic began in March and April 2020. This suggests that we will see a decline in multifamily housing starts this year.