Index Points to Slowdown in Construction

After months and years of positive growth, a key indicator of commercial instruction activity has dropped nine points. According to recent statistics from a monthly survey produced by the American Institute of Architects Economics & Market Research Group, commercial real estate construction activity will slow over the next nine months.

For February 2008, the AIA Architecture Billings Index was down nine points to 41.8, its lowest reading since October 2001. "This is a clear indication that there could be tougher times ahead for design firms and a noticeable slowdown in commercial construction projects coming online in the foreseeable future," says Kermit Baker, chief economist for the American Institute of Architects. Any reading above 50 is seen as an indication that activity is increasing.

The index shows about a nine to 12 months lag period between architecture billings and construction activity. The index is based on a survey sent to a group of architectural firms about whether their billings have gone up or down in the last month. Higher billing activity today is seen as an indication that more architects are billing for services, which means that more construction activity lies ahead.

On a regional basis, the index shows the Northeast at 51.5, the South at 48.3, the West at 46.3, and the Midwest at 42.6. Also, the multifamily sector is at 46.6, the mixed-use sector reading is 43.9, and the reading for the commercial/industrial sector is 40.6. Billing activity for institutional projects shows a 54.9 reading.

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ABI Indicates Construction Slowdown  

For February 2008, the AIA Architecture Billings Index fell to 41.8, its lowest reading since October 2001. This indicates a possible slowdown in commercial real estate construction activity going forward.

Period          ABI
Feb. 2008    41.8
Feb. 2007    52.9
Feb. 2006    56.1
Feb. 2005    56.4
Feb. 2004    55.2
Feb. 2003    47.8
Feb. 2002    46.6

Source: American Institute of Architects


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