In AN’s ongoing recession watch, there is good, or at least better, news to report today. The American Institute of Architects released its Architecture Billings Index numbers this morning, and while billings remain in decline, after hitting a record low last month, the rate of decline has abated. Also, inquiries about new work have begun to rise to positive levels.
Kermit Baker, the chief economist for the AIA, said the worst may be over. “There’s good news and there’s bad news,” he told AN. “The bad news is, the market activity still continues to decline. The good news is, it’s not as bad as it was.”
According to the index, billings in April rose to 45.5 from a record low of 39.7. A number above 50 means billings are rising while a number below 50 means they are falling.Inquiries for new work rose to 53.9 from 48.0 in March, which was also a historic low, and only the second time in the index’s 13 years that it has fallen below 50. The previous low for inquiries was in September 2001, largely resulting from 9/11.
The Architecture Billings Index, begun in 1995, is the closest thing the industry has to a market forecast. It is produced from the monthly Work on the Boards survey the AIA sends out to firms of all sizes scattered across the country.
Baker said the numbers fit the usual economic patterns for the industry. “The way these cycles play out is, you have a period of accelerated decline followed by a period of moderating decline and then of mild growth,” he said. “Unless the economy was really falling apart, you’d expect the decline to moderate, which is consistent with the numbers we’re seeing in the greater economy, such as first-quarter GDP and April jobs.”
Regional differences persist within the numbers, though none have yet climbed into the black. The Northeast, which had the steepest decline this year after hovering around 60 for much of 2007, rebounded in line with the national numbers, to 41.6 from 38.7. The South has remained the most stable region over the last year, and it has the highest index value, 46.6. The Midwest, which began to decline before other regions, had the largest gain of the month, to 41.6 from 36.9. Meanwhile, numbers in the West continue to fall, from 38.7 to 37.7.
Certain industry sectors have been relative bright spots in these trying times. Institutional work has yet to fall below 50, though it, too, has declined, to 50.4 from 54.9 in February. The commercial/industrial and residential sectors are doing less well, largely a result of the real estate crisis that has shocked the economy as a whole. The former is at 39.3, while the latter is 33.5. Despite the low numbers, all sectors saw a billings increase in April.
Baker cautioned architects against complacency, even if they feel as though they have more work than they can handle. He advised firms to maintain a healthy backlog of work, increase their marketing to find more, and keep a close eye on any projects that could falter. “You might get the phone call tomorrow to say, ‘Stop working on that project,’” Baker said.
Rik Master, the president of AIA Chicago, agreed with many of the index’s numbers, including the early hit to the Midwest, which he said might have been a blessing because it made people take notice. “Most architects are still looking at it very cautiously, and considering the whole economy,” he said. “Normally, they’re either ahead of it or behind it, and I think everyone is trying to figure out where we are in relation to everything else. Hopefully we’re ahead of it. I think we are.”