Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Demand for design services continues to slow
Demand for design services from architecture firms continued to decrease in November, according to a new report from The American Institute of Architects (AIA).
The pace of decline during November accelerated from October, posting an Architecture Billings Index (ABI) score of 46.6 from 47.7 (any score below 50 indicates a decline in firm billings). The pace of inquiries into new projects slowed, but remained positive with a score of 52.0, however new design contracts remained in negative territory with a score of 46.9.
“Given the slowdown in new project work, many architecture firms will rely on their near record levels of backlogs to support revenue,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Still, firm leaders remain largely optimistic about future business trends. Almost two-thirds of architecture firms project that 2023 will be either a good year or great year for their firm.”
• Regional averages: South (50.5); Midwest (47.6); West (45.8); Northeast (42.4)
This graph shows the Architecture Billings Index since 1996. The index was at 46.6 in November, down from 47.7 in October. Anything below 50 indicates contraction 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 had been positive for 20 consecutive months but indicated a decline the last two months. This index usually leads CRE investment by 9 to 12 months, so this index suggests a pickup in CRE investment in early 2023, but if the weakness persists – a slowdown in CRE investment later in 2023.