As the Fed took drastic action yesterday, there was some debate as to what more could be done to buoy world markets. For U.S. architects, there may already be nothing left to do but wait and pray, in light of the latest numbers released for the AIA’s monthly Architecture Billings Index. Counter to expectations, the index fell once again, surpassing the historic lows set in October.
“The past couple months have been very serious in the design field,” Kermit Baker, chief economist for the AIA, told AN. “The downturn is spreading. It’s affecting a broad range of non-residential buildings. It’s getting worse. It hasn’t hit bottom yet. It could be some time before we turn this around.”
The billings for the month of November fell to 34.7, 1.5 points lower than in October. The measure of firms’ payments was as high as 47.6 in August, with a reading of 50 being neutral and anything below meaning a reduction in payments received by firms surveyed by the AIA. In further disturbing news, inquiries for new work also fell to a new low, reaching 38.3, down from 39.9 in October. It is only the fourth month in the index’s now 14-year history that inquiries have registered below 50.
Also, for the first time in the index’s history, every measure fell across the index, including in all four regions and all four sectors. “When things go down, it’s the opposite of the old JFK saying—a declining tide lowers all boats,” Baker said. “Big declines make it hard for any region or any sector to swim against the tide.”
Most notable was the fall in the commercial/industrial sector to a reading of 26.7, from 33.6 in October, the lowest single reading for any part of the index in its history. Baker said he believed this was a result of huge payroll declines in office tenants and falling consumer confidence, which would impact retailers. “It means that sector is really screeching to a halt, at least for a time,” he said.
The institutional sector, which had been the one bright spot for the industry for some months, also continues to fall, reaching a new low of 40.8 for the month, and multifamily housing registered a new record low of 30.0. As for regions, all are now reading below 40, with the Northeast being the strongest at 39.5. The Midwest, which had been the strongest region after a dip in the spring, fell to the lowest point, at 31.4. The South (36.8) and West (33.5) fared only slightly better.
During a telephone interview earlier today, Baker said that he had expected the numbers to slightly improve this month, not fall, because he believed the credit markets had slightly improved. He said he remains hopeful that this is the case, but it still does not solve the other problem impacting the industry, which is the weak economy.
Baker also said that the numbers indicated that architects nationwide were seeing some serious damage to their portfolios. “These numbers suggest more than some expected work not coming in,” he said. “You would only expect to see such declines if projects that were well underway, projects that were in contract, were totally frozen or cancelled altogether. If financing resumes, that could reverse. But a lot of these projects are not coming back anytime soon.”