Watching commercial real estate for signs of the coming future means keeping an eye on many different indicators. One such number touted as a leading indicator of construction spending is the American Architecture Association’s Architecture Billings Index.
Used as an indicator for new nonresidential construction going out 9-12 months, the ABI defines nonresidential as “lodging, office, commercial, manufacturing, health care, educational, religious, public safety, amusement and recreation, transportation, and communication.”
The AIA Work-on-the-Boards survey is conducted monthly across a national panel of architecture firms. About 300 architecture firms actively participate, and firms included in this survey provide architectural services as their principal design service offered. Firms may also provide engineering, interior design, landscape architecture, planning, urban design, or related services. Most firms also provide pre-design or construction-phase services (e.g., construction management) in addition to their architectural design services.
June’s number is not looking so hot. And it appears to be a repeat of a pattern for a springtime activity slump.
So what’s the good news?
Splitting hairs is something we’re forced to do sometimes when analyzing commercial RE, as so many real estate industry indicators include residential right along with our focus in nonresidential. A little closer look at the Index shows a different story for commercial and industrial properties. Architecture work commissioned by developers for industrial and commercial property are actually “slightly up”.
“For the second year in a row, we’re seeing declines in springtime design activity after a healthy first quarter,” he said. “This should be an alarm bell going off for the design and construction industry.”
The decline in demand hit nearly all four sectors covered by the index with the biggest drops hitting residential and institutional real estate. The commercial and industrial sectors showed slight gains in demand but the increases were less than in previous quarters.
Is the market in commercial real estate healthy from coast to coast? No. But our industry’s projects are sending more professionals to the drawing board, and that’s a bit of good news that easy to miss.