Good news for economic prognosticators worried that the continued rise of the Architecture Billings Index (ABI) would fizzle after a strong showing in April. Today, the American Institute of Architects (AIA) released its latest round of figures for May 2021, and demand for architectural services is at a record high.
Just how high? The ABI, a composite metric of demand and signed contracts, hit 58.5 in May, up from 57.9 in April (again, anything over 50 is an increase from the month before, anything under is a decrease). This is the fourth month in a row of gains, and according to the AIA, that 58.5 number is one of the highest in the ABI’s 25-year history.
“Despite ballooning costs for construction materials and delivery delays, design activity is roaring back as more and more places reopen,” said AIA chief economist Kermit Baker, in the AIA’s press release “However, concern over rising inflation and ongoing supply chain disruptions, as well as emerging labor shortages, could dampen the emerging construction recovery.”
On a more granular level, there were particular standouts that point to a prolonged recovery for the sector. The project inquiries index, which tracks interest in future projects, shot up to 69.2 in May (technically lower 70.8 in April but still representing an increase from that), indicating that demand was holding strong. Meanwhile, the design contracts index, which represents new design contracts signed, hit a record high for a second consecutive month, moving from 61.7 in April to 63.2 in May—it seems developers are putting their money where their mouth is and feel comfortable signing on to build again.
Demand remained strong on a region-by-region basis as well, although not uniformly. The Midwest continued its hot streak, moving up to 63.4 in May from 60.6 in April, while the South saw similar gains, going up to 59.0 from 58.3 in April. Meanwhile, demand in the West finally began rising, hitting 57.4 in May, up from 52.4 in April. The Northeast, the region hit hardest by the pandemic architectural services-wise, continued to lag behind all other regions, “only” rising to 54.2 in May from 55.0 in April—a slight bump, but nothing too impressive.
Sector-wise, even project types that had been hit severely hard during the pandemic (institutional projects withered under a projected loss of tax and tuition revenue, for example) continued to rebound. Firms specializing in commercial and industrial work saw demand rise yet again, as the ABI figure hit 60.6 in May, up from 59.1 in April, likely due to the lifting of lockdown restrictions. Demand for firms working on multifamily residential projects moved to 59.5 in May from 56.9 in April, while institutional demand continued to rise as well, hitting 57.1 in May, an increase from 56.7 in April. Finally, mixed-practice firms saw demand rise as well, up to 57.9 in May.
As Baker noted, much of this increase is likely being throttled by sky-high construction material prices and impressive, but still lagging, rates of vaccinations across the United States. However, lumber costs have begun falling from their record high prices in May, indicating that supply is finally reaching parity with increased demand—that’s likely a good sign for June’s ABI numbers.