WASHINGTON, D.C. — With a score of 50.9 for January 2012, The Architecture Billings Index (ABI) has posted positive results 3 months in a row for the first time since January to March 2011. The index is generally used to help gauge the onset of construction activity 9 to 12 months in advance, according to The American Institute of Architects (AIA), a Washington, D.C.-based association that publishes the ABI.
“The ABI typicaly leads nonresidential construction spending by 9 to 12 months, meaning that if this rebound in architecture firm billings is sustained — stays above 50 — then construction spending should begin to increase by the end of the year,” says Jennifer Riskus, manager of economic research at AIA.
The ABI is a monthly index based on a score of 50, with scores greater than 50 indicative of an increase in architecture billings and scores below 50 indicative of a decline.
The ABI posted 5 months of 50+ scores in November 2010 to March 2011 without any dramatic construction starts in the 9 to 12 months thereafter. Kermit Baker, chief economist of AIA and Honorary AIA member (Hon. AIA), explains the difference between those results and the most recent scores.
“Even though we had a similar upturn in design billings in late 2010 and early 2011, this recent showing is encouraging because it is being reflected across most regions of the country and across the major construction sectors,” said Baker in a prepared statement.
The newest index found the Midwest region had the strongest showing with a 53.7 score, followed by the South (51.6), Northeast (50.7) and West (45.6). Across property sectors, residential posted a 52.6 score, followed by commercial/industrial (52.2), institutional (51.1) and mixed-use (46.1). Regional and property sector index scores are based on a 3-month average, while the national score is a monthly result.
The West was the lowest performing region and the only one to fall below 50 in the most recent showing. Saundra Stevens, executive vice president of AIA Oregon, isn’t worried with the results.
“I’m not too concerned about that number,” says Stevens. “I’m hearing about activity beginning to take place and projects that are beginning to come on line. I’m seeing more positive discussion in that way than I’ve heard in 3 years.”
The biggest challenge for the West, Stevens explains, is the long climb back following a sharp downturn.
“We took a pretty hard hit regionally compared to other parts of the U.S.,” says Stevens.
Another factor in the West’s sub-50 showing has been the decrease in funding for construction projects compared to pre-recession levels. The tight underwriting standards for construction have impeded activity, and Oregon is poised with projects that are ready to go.
“All (the projects) need is a release in funding,” says Stevens. “We need to unfreeze the credit and get projects going again. They’re beyond mostly ready, they’re ready.”
“The fact that we’re not seeing the numbers of 55 or 60, those are the numbers we’re looking for,” emphasizes Don Powell, founding principal at BOKA Powell, a commercial design firm based in Dallas. “That’s when we know the recovery is taking place.”
Not many experts expect the construction levels to be dramatic in the coming months, but the ABI is a sign things are heading in the right direction. Even though the West posted a reading below 50, the region is on an upswing 4 months running.
“I’m comfortable saying that the ABI is going to continue to go up,” says Stevens. “That’s our take from our area — we’re feeling pretty positive.”
— John Nelson