The latest Architecture Billings Index (ABI) dropped from 47.2 in May to 46.3 in June. The drop represents the third straight month of decline, with last month’s low already the worst since February 2010 when the ABI was 44.8. “Every month, I keep waiting for it to break loose, but it wasn’t in June,” said AIA Chief Economist Kermit Baker. As he has said before, Baker pointed out that economic and political issues beyond the industry inevitably take their toll. Daily headlines, like the President and Congress wrangling over the debt ceiling, could lead to higher borrowing rates for real estate projects, spelling potential catastrophe for the sector should they then default.
As the index provides a snapshot of the big picture, anecdotally the reality remains a bit more diverse than numbers might suggest. More than a few firms report that they are signing more contracts and that the work stream is getting steadier. “Comments from architects are all over the board,” said Baker. “Some say it was their best year ever and others are more like, ‘What recovery? I haven’t seen work in a year!’ But that’s the nature of the beast for the type of small businesses that architecture firms tend to be.”
Perhaps the biggest regional surprise was that the West, which has been floundering for some time, came out on top as the only area pulling positive numbers (any ABI number below 50 is considered negative). The region went from 49.3 in May to 51.7 in June. The South dipped negligibly from 47.5 to 47.3, while the Northeast also slipped a fraction. The Midwest continued their unabated decline, going from 45.9 to 44.6.
In the sector breakdown, mixed practices rose substantially from 45.2 to 51.7, while commercial/institutional broke through to 50.0, up from 46.5. Multi-family residential didn’t fare as well, dropping from 53.6 to 49.6. Institutional shifted from 44.9 to 45.9.
If any good news was to be gleaned from the report, it was that project inquiries jumped from 52.6 to 58.1. Does this mean relief is in sight? Baker reacted cautiously and explained the discrepancy of bad billings alongside a lift in inquiries. “In general, better inquiries rise in association with better billings, a month or two down the road, but it is also typical for inquiries to be all over the map.”