Architecture Billings Index Reaches Near Record Level

Summer surge in design service demand comes amid fears lending industry may threaten construction activity
August 11, 2010

Washington, D.C. – August 22, 2007 – Up slightly from the 59.3 mark in June, the Architecture Billings Index (ABI) in July reached the second highest mark since the survey’s inception in 1995. As a leading economic indicator of construction activity, the ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI rating was 60.0 (any score above 50 indicates an increase in billings), and inquiries for new projects was 66.2.

 

“The good news for the construction industry based around high levels of demand for architectural services is tempered somewhat by nervousness in the lending market based around the collapse of the subprime mortgage sector,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “While the credit markets for nonresidential projects will most likely return to normal, there is a sense that some construction projects may be delayed until financing anxiety is settled. We will be monitoring this situation closely over the next couple of months.”

 

Key July ABI highlights:

Regional averages: Northeast (68.5), West (60.7), Midwest (55.9) South (57.2)Sector index breakdown: commercial / industrial (65.2), institutional (61.0), mixed practice (58.0), residential (55.5)Billings inquiries index: 66.2

 

Franco Turrinelli, senior analyst at William Blair & Company, added, “Investors have been nervous about the economic outlook and in particular about construction related activities. The potential for weakening construction project demand as a result of the subprime residential mortgage fallout has been a significant concern to investors. July’s ABI data suggests, on the other hand, that demand remains strong and that visibility into continued construction center strength should be encouraging for investing in these segments.”

         
 

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