AIA Sees Light at End of Tunnel

AIA Sees Light at End of Tunnel

Construction work continues to languish this year, but the AIA is predicting growth in 2011.
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It has been a rough year for architects, despite talk of a recovery and an end to the recession. There are now pervasive fears about a possible “double-dip” recession, but at least in terms of construction, and by extension design, things should not be headed that way, according to a new report from the AIA.

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In its semi-annual Consensus Construction Forecast, the AIA found that nonresidential construction will actually be worse this year than it predicted with the last forecast in January, as projected construction output is now expected to fall by 20.3 percent, as opposed to the decline of 13.4 percent anticipated at the start of the year. On the bright side, the estimate for 2011 has shifted upward, to a positive growth rate of 3.1 percent, up from 1.8 percent in January.

Kermit Baker, the AIA’s chief economist, said architects should also take heart that the worst of this “dismal” year may be over. “My sense is a lot of the downgrading we did for the forecast was from the first six months of the year,” Baker said. “This is not a prediction about the second half of the year getting worse. Fundamentally, this is not that different from what we said in January.”

By this Baker means to suggest that the prediction that 2010 will be bad but 2011 will be better is still true, with a construction recovery coming sometime in the first half of next year. With a 9-12 month lead time for architecture firms, Baker maintains that the design industry should still see positive growth by the end of this year, even despite recent unsteadiness in the AIA’s Architecture Billings Index.

In the latest forecast, institutional work continues to out perform commercial/industrial work in the construction industry. This may not jibe with the billings index, where commercial/industrial work has been surging, but because of the lag time between design and construction, a strong showing by the commercial/industrial sector next year would be reflected in strong billings now, as demonstrated by the forecast.

Most institutional work is currently declining in the single digits or low teens, while commercial/industrial work is languishing with declines in the 20s, with the exception of hotels, which fell a woeful 43.3 percent. Yet, hotels, are expected to bounce well back into positive territory next year, hitting 8.7 percent, with similar swings for office buildings, retail, and industrial work, which will still be declining, though only by 2 percent. The institutional sector will be in a similar range, with amusement/recreation leading the way at 8.1 percent and health care at 5.1 percent. All of this is encouraging, especially that the commercial sector can make up so much ground so quickly. Baker does caution that the sector is given to volatility.

While Baker would not go so far as to rule out another collapse in the industry, he said the fundamental signs do not point in that direction. He did note that were such a “double-dip” to occur, “it would be devastating to the profession.”

“I don’t think there was a lot of news in this one, frankly,” Baker said. “The December one will show us how serious this recovery is shaping up to be, whether there will be real growth next year and the year after. The big news this time is the cyclical pattern is pretty much what we thought it was, that the recovery is just about finally here.”

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