“Architecture firm billings slump deepens” in September
Architecture Billings Index in Contraction for 47 of Last 48 Months This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment including multi-family residential. From the AIA: Business conditions softened further at architecture firms in September The AIA/Deltek Architecture Billings Index® (ABI) score of 44.7 for the month shows further weakening from August , and the greatest share of firms reporting declining billings since May. While inquiries into new projects increased modestly, the value of newly signed design contracts declined further, after approaching growth over the summer. And while firm backlogs averaged a relatively strong 6.2 months at the end of the third quarter, they have fallen from 6.6 at the end of the first quarter. The most noticeable decline in backlogs was at firms with a multifamily residential specialization, where backlogs have fallen from 6.2 months at the end of March to 4.8 months at the end of September. Backlogs remained steady at 8.1 months at large firms with annual billings of $5 million or more and 8.0 months at firms with an institutional specialization and increased from 3.1 months to 3.8 months at small firms with annual billings of less than $250,000. While backlogs have declined across the board from their post-pandemic peaks, most firms still have a decent amount of work in the pipeline at this time. Business conditions were very mixed across the country in September. While billings remained very soft at firms located in the Northeast and continued to weaken from earlier in the year at firms located in the South, they improved at firms in other areas, with firms located in the West and Midwest both reporting flat billings. In addition, firms with a commercial/industrial specialization also saw slight growth in billings for the second consecutive month in September. However, billings declined for the sixth consecutive month at firms with an institutional specialization and for the fifth consecutive month at firms with a multifamily residential specialization, where conditions have weakened significantly since showing promise at the beginning of the year. ... The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months. emphasis added • West (49.8); Midwest (50.7); South (46.1); Northeast (40.7) • Sector index breakdown: institutional (47.0); commercial/industrial (50.4); multifamily residential (47.8) . This graph shows the Architecture Billings Index since 1996. The index was at 44.7 in September, down from 47.2 in August Anything below 50 indicates a decrease in demand for architects’ services. This index has indicated contraction for 47 of the last 48 months. 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 typically leads CRE investment by 9 to 12 months, so this index suggests a slowdown in CRE investment into 2027. This slump wasn’t as sharp as during the housing bust, but has lasted longer. Multi-family billings have been below 50 for 48 of the last 50 months. CalculatedRisk Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. Thanks for reading CalculatedRisk Newsletter! This post is public so feel free to share it. Share