After three straight months of improving conditions, the Architecture Billings Index (ABI) fell nearly three points. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12 month lag time between architecture billings and construction spending.
The American Institute of Architects (AIA) reported the May ABI rating was 45.8, down substantially from a reading of 48.4 the previous month. This score reflects a continued decline in demand for design services (any score above 50 indicates an increase in billings), and comes on the heels of the highest score since January 2008 when revenue at architecture firms headed into recession. The new projects inquiry index was 55.5.
“This dip is somewhat of a surprise since it appeared that conditions were pointing towards a recovery,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The overriding issue affecting the entire real estate sector is unusual caution on the part of lending institutions to provide credit for construction projects that apparently would be successful in this economic environment.”
He added, “An amendment has passed the House that would help lenders and borrowers as they attempt to work out their loans under terms that are mutually acceptable, avoid large numbers of commercial foreclosures, and free up credit that can be used more constructively. If this passes the in Senate then some much needed relief will available for the struggling design and construction industry.”
Key May ABI highlights:
Regional averages: Northeast (50.6), Midwest (48.5), South (45.9), West (42.9)
Sector index breakdown: commercial/industrial (51.3), mixed practice (46.8), institutional (43.4),
Project inquiries index: 59.6