Heading into the holidays, the AIA has more good economic news to report: the Architectural Billings Index (ABI) has recorded a third straight month of growth. The October score was 52.8, up from September’s 51.6 (any score above 50 indicates a growth in billings). The uptick reflects improving conditions in the housing market and real estate more broadly. All four regions were in positive territory, with the South leading at 52.8, followed by the Northeast at 52.6, the West at 51.8, and the Midwest at 50.8.
The AIA has released its Architecture Billings Index (ABI) for September, and the news looks good. According to the organization, the ABI score went to 51.6, up from 50.2 in August (any score above 50 reflects an increase in billings). The spike marks the fastest increase in the demand for design services since 2010.
The AIA tied the upswing in billings to an increased demand for rental housing. “Going back to the third quarter of 2011, the multi-family residential sector has been the best performing segment of the construction field,” said AIA Chief Economist Kermit Baker. “With high foreclosure levels in recent years, more stringent mortgage approvals and fewer people in the market to buy homes there has been a surge in demand for rental housing. The upturn in residential activity will hopefully spur more nonresidential construction.”
The AIA’s monthly Architecture Billings Index (ABI) for July came in with a disappointing 48.7 (any score below 50 indicates a decline in billings for design activity). The news was not all bad though. The ABI was up significantly from last month’s score of 45.9. “Even though architecture firm billings nationally were down again in July, the downturn moderated substantially,” said AIA Chief Economist, Kermit Baker. “As long as overall economic conditions continue to show improvement, modest declines should shift over to growth in design activity over the coming months.”
“It’s like déjà vu all over again,” AIA chief economist Kermit Baker said of the steep springtime drop reflected in May’s Architectural Billings Index (ABI). Baker was referring to the trend from 2011, when design activity took a substantial hit after an initially healthy first quarter. “But we don’t want to have a repeat of last year,” he added referring to the sluggish numbers that continued to shadow the profession through the fall. The new numbers were the worst since October and, Baker said, reflect trends in the larger economy.
For the past five months things were looking up for the Architecture Billings Index. Until now. Granted, the index was merely teetering on the positive side of the spectrum at 50.4 for March (any score above 50 reflects an increase), so it didn’t have far to drop into the negative territory of 48.4 for April. Despite the five-month positive stint, throughout the period AIA Chief Economist, Kermit Baker urged cautious optimism in what has clearly been a tepid recovery. In a statement released today, he said that the decline in demand for design services is not surprising considering continued volatility in the overall economy. “Favorable conditions during the winter months may have accelerated design billings, producing a pause in projects that have moved ahead faster than expected,” he said.
The Architecture Billings Index (ABI) has registered promising gains since late last fall, and, according to the AIA’s latest report on March billings, the ABI continues to find its footing in positive territory—but just barely. The overall March score was 50.4, indicating slight growth in demand for services (any score above 50 reflects increase in billings) but less growth than the previous month (the ABI was 51.0 in February).
The Architecture Billings Index is up, hitting 52.0 in November, the first positive ground since touching 51 in August (anything over 50 indicates an increase in billings). The roller-coaster volatility of the past few months—we held our breath and skipped reporting September’s down and October’s up—suggests cautious optimism that the index which tracks the approximate nine-month lag time between architecture billings and construction spending is finally in a solid swing upwards.
While a number of new rental towers have been announced in recent months, Crain’s has an informative article about a number of Chicago condominium developers who are beginning to build again, albeit at a very small scale and in tightly phased sequences. Even for projects as small as 14 units, banks are demanding projects be split into two phases, six units first, followed by eight in a second building. Some developers are also willing to accept lower offers from buyers for higher down payments up front. The thinking reflects new stricter lending standards and continuing economic uncertainty. But with Chicago’s condo market still over-saturated and the foreclosure crisis just beginning to wane, it also reflects a much needed correction from previous patterns of over building and over lending. And, pardon me Mr. Burnham, but isn’t incremental city-making and infill development often the best approach?