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False Hope

False Hope

Green shoots or not for the wide economy, the worst may not be over for architects after all. Following a brief uptick in the AIA’s Architecture Billings Index this spring, payments to the country’s architecture firms have swung back to double-digit declines, and billings fell in every region and sector for the month of June, with the exception of the West, which saw only a marginal gain from already dismal numbers.

“It looked like we were moving in the right direction, then it looked like we were slipping, and now it looks like we’re heading back down,” Kermit Baker, the AIA’s chief economist, said. “Hopefully, that’s an aberration, but it’s certainly cause for concern.”

In June, the billings index, which was released yesterday, fell 5.2 points to 37.7 after spending the three preceding months in the low 40s. That is by no means the sought-after 50s, at which point billings would be rising, not falling. But having spent October through February in the 30s, the lessening decline was seen as payments heading in the right direction. Now that future is less assured.

The problem appears to be the relative ineffectuality of the national stimulus program in reaching the architecture and design communities, and the nature of the current recession. Being driven largely by speculative real estate investments, there is now so much excessive supply in the nation’s building stock that demand remains low, even for non-residential and non-commercial projects. In fact, institutional work, usually a buoy during hard economic times, is now the worst performing sector. With such non-traditional patterns emerging, predicting future movement for the industry becomes all the more difficult.

“We’d been hoping for a turnaround, and the big question was where and how fast,” Baker said. “We thought maybe we were there, but these recent trends are not encouraging.” While Baker believes the national stimulus has helped right the economy, it has had little direct impact on architects, as most work has been even more shovel-ready than initially expected. In the long run, though, this could help.

The American Society of Landscape Architects also released a report Monday boasting of gains in the first quarter, but in light of the sudden drop in the AIA’s index, they could be in trouble as well. And with the news today that realtors’ numbers are up—and the Dow with it—Baker noted that sector’s fate has been far worse than what is facing the architectural community already, as home sales have been trending downward for three years, falling a total of 70 percent. “That is not a place we want to reach,” Baker said. The AIA index has been down, by contrast, for only 18 months.

Regionally, the Midwest continues to suffer, now becoming the worst at 36.2, down from 41.5 in May. The Northeast fell the furthest, however, after a strong comeback when it was the weakest-performing region during the winter, hitting 42.8, down from 48.3 in May. The South slipped slightly to 40.5 from 41.3, and the West remained almost unchanged, rising 0.5 points to 39.9, its ninth month in the 30s.

All four sectors fell, as well, with mixed-use work faring the best, falling one point in June to 43.5. Multifamily residential work dropped to 42.7 from 45.5, and the commercial/industrial sector, battered by the recession’s slackening pace on the economy, hit 39.5 from 43.1 in May. All three sectors had post continuous gains in recent months as well. The once-reliable institutional sector continued to suffer, dropping one point to 37.0.

The one potential bright spot is that inquiries for new work remain positive, though they also fell, reaching 53.8, down from 55.2 in May. Should they continue to slip and fall below 50, it will mean even more problems for architects.

“The industry is going to have to wait until this picks up the entire economy, and people start hiring architects again,” Baker said.

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