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AIA: Architecture Billings Index "Moderates but remains healthy" in September

by Calculated Risk on 10/19/2022 12:09:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index moderates but remains healthy

For the twentieth consecutive month architecture firms reported increasing demand for design services in September, according to a new report today from The American Institute of Architects (AIA).

The AIA Architecture Billings Index (ABI) score for September was 51.7 down from a score of 53.3 in August, indicating essentially stable business conditions for architecture firms (any score above 50 indicates an increase in billings from the prior month). Also in September, both the new project inquiries and design contracts indexes moderated from August but remained positive with scores of 53.6 and 50.7, respectively.

“While billings in the Northeast region and the Institutional sector reached their highest pace of growth in several years, there appears to be emerging weakness in the previously healthy multifamily residential and commercial/industrial sectors, both of which saw a decline in billings for the first time since the post-pandemic recovery began,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Across the broader architecture sector, backlogs at firms remained at a robust 7.0 months as of the end of September, still near record-high levels since we began collecting this data regularly more than a decade ago.”

o Regional averages: Northeast (54.6); Midwest (52.1); South (51.7); West (51.6)

o Sector index breakdown: institutional (58.9); mixed practice (50.3); commercial/industrial (49.6); multi-family residential (47.9)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.7 in September, down from 53.3 in August. Anything above 50 indicates expansion in demand for architects’ services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index has been positive for 20 consecutive months. This index usually leads CRE investment by 9 to 12 months, so this index suggests a pickup in CRE investment into 2023.

Note that multi-family billing turned down in September, and if that continues, we will see a downturn in multi-family starts sometime in 2023.

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