The American Institute of Architects (AIA) released the July Architecture Billings Index (ABI) last week while I was on vacation. Why is the ABI important? Well, the ABI is a nine-to-12 month leading indicator of construction activity. A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The numbers continue to be robust with the overall ABI measure clocking in at 58.5. If you are a pessimist, you might be thinking "the ABI was a record 58.5 for May 2021 and has decreased for two straight months" and you would be correct. However, since January 2012, the average ABI has been 50.7, so 54.6 is still pretty impressive. Scratch that, it is really impressive and it shows that the rebound in construction is still ongoing given that we have had six straight months above 53. 

How are things playing out regionally? Pretty darn well overall. Three of four regions saw decreases but they just went from boiling lava hot to merely scorching:

• Northeast: 54.1 (up  from 53.2 in June, the only gainer. The Northeast was in a secular decline averaging 48.4 since 2012 but has been on a tear since the COVID rebound)
• South: 54.6 (down from 57.3 last month)
• Midwest: 58.3 (down sharply from last month's 62 but still very strong)
• West: 56 (also down sharply from June's 59.7; see below for some color commentary on a western city)

The story is similar for the industry sector breakdown except all sectors declined:

• Multi-family Residential: 54.7 (down from 57.9 in June and the biggest absolute decliner)
• Commercial/Industrial: 58.4 (down from 61 last month but still performing strongly)
• Mixed Practice: 54.4 (down from 56.4 in June)
• Institutional: 55.4 (down from June's 57.3)

Declines? Yes. Bad news? No. Since May of last year, the industry has essentially been running an uphill wind sprint at high altitude. We were bound to slow down at some point. That said, we are still running at a very fast pace.
Project inquiries also declined from 71.8 in June to 65 in July, but inquiries are still way above the historic average of 58.8.

Finally, in a gratuitous attempt to combine the two things I geek out on, below are a few pix of the four tower cranes up in Boise, ID. There were three when we visited in February; the first pic is the newest crane, a mixed-use development with multi-family unites on podium parking and and adjacent parking structure. Boise is a booming (to the excitement or chagrin to locals...housing prices are astronomical and I say that as someone living in California). Anyway, tower cranes and good economic data are two of my favorite things.

It was bound to happen. Since bottoming out in May 2020 with a score of 32, the Architecture Billings Index (ABI) published by the American Institute of Architects has been on a meteoric rebound, peaking last month at 58.5 (a value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The ABI is a nine-to-12 month leading indicator of construction activity). That kind of growth was unlikely to last forever and it didn't. The June ABI was reported today at 57.1 which is a decrease but is still the third highest reading since at least 2012. Long story short: architects are still busy which means builders should remain relatively busy for the foreseeable future.

Three out of four regional ABI figures were down, but again, they are still very robust:

• Northeast: 53.2 (down  from 54.2 in May)
• South: 57.3 (down from 59 last month)
• Midwest: 62 (down from last month's 63.4 but still torrid)
• West: 59.7 (up from May's 57.4 and the only gainer)

​The record for industry sectors was 50-50 with two small increases and two decreases:

• Multi-family Residential: 57.9 (down from 59.5 in May)
• Commercial/Industrial: 61 (up from 60.6 last month)
• Mixed Practice: 56.4 (down from 57.9 in May)
• Institutional: 57.3 (up fractionally from May's 57.1)

A particular bright spot is project inquiries which reached a new record with a 71.8. The cost of timber and lack of labor have apparently not stopped owners from reaching out to architects.

All in all, the good news keeps on coming. Stay safe out there...fatigue is real.

The American Institute of Architects (AIA) made us wait a few days longer than normal, but it was worth it. The May installment of the Architecture Billing Index (ABI) dropped this morning and they have reached another record high of 58.5, exceeding the previous record of 57.9 set last month. A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The ABI is a nine-to-12 month leading indicator of construction activity. Spoiler alert: the construction industry is poised to get even busier of the next year.

Regionally, the South has been the hottest market for some time, but this month's data reveals an interesting plot twist:

• Northeast: 54.2 (down  from 55 in April and the only regional decliner)
• South: 59 (up from 58.3 last month and and setting a new high)
• Midwest: 63.4 (up steeply from last month's boffo 60.6 and a new record)
• West: 57.4 (up from April's 52.4)

The Midwest's 63.4 is the highest individual ABI number since at least 2012. If anyone can explain how the Midwest went from perpetual laggard to the hottest market for architects almost overnight, please let me know. Perhaps a road trip to Chicago is in order...

As far as market sectors are concerned, May was a month of increases across the board:

• Multi-family Residential: 59.5 (up from 56.9 in April)
• Commercial/Industrial: 60.6 (up from 59.1 last month and a new record)
• Mixed Practice: 57.9 (up from 55 in April)
• Institutional: 57.1 (up from April's 56.7)

Not only were all of sectors up, but they were up pretty strongly.

If there is one source of concern (and I am digging deep here), it would be project inquiries, which slipped from a record of 70.8 in April to 69.2 in May. This is still a great result but my proclivity for pessimism needs to show itself somewhere. Great, now I'll shove it back into the recesses of my soul so we can enjoy the overwise great news.

Let's keep this party going!

The slides from my presentation to the Upstate South Carolina chapter of the American Society of Civil Engineers-Institute of Transportation Engineers (ASCE-ITE) on June 23, 2021. Questions and comments are certainly welcome. Thanks to Grant Hollis for the invitation to speak.
(For my California friends: upstate South Carolina includes the cities of Anderson, Greenville and Spartanburg and is the home of the Clemson Tigers. Now you know.)

It has been a while since I've posted about contractor backlogs. I'm the guest speaker for an ASCE-ITE chapter in the southeast next week and we will be discussing (shocker) construction economics. Construction input costs are up (another shocker: it's predominantly due to material costs), but costs are also a function of contractor backlogs. When backlogs get deep, contractors raise fees, leading to higher project costs and when they slide, contractors decrease their fees in order to be more competitive. Simple supply and demand. So, how are backlogs? Luckily, our friends at the Associated Builders and Contractors (ABC) publish this data. Generally speaking, they have been increasing in the aggregate since November 2020 with a few dips along the way. The November 2020 backlog data point of 7.2 months was the lowest result since Q4 2010 (the data used to be released quarterly and now it is monthly. Please note that I have aggregated the monthly data into quarterly data in the graphs below. The aggregate backlog data is shown below:

So the general trend is positive, yet let look at the details, starting with the industry sector breakdown for May:

• Commercial & Institutional: 8 months (no change from April)
• Heavy Industry: 6.5 months (down from 7.3 last month)
• Infrastructure: 8.7 months (up from 7.9 in April)

What I find interesting is that everyone in the United States is talking about infrastructure, the backlogs for contractors performing that type of work has been on a downward trend since Q4 2017. This could be due to many factors, yet my mind is formulating a conspiracy theory that posits that it is declining because "infrastructure week" went from being a joke in the last presidential administration and is shaping up to be a Greek tragedy in the current one.​ The overall quarterly numbers are represented below at the close of the second month of Q2 2021:

Moving on to geographic area, the results are more mixed:

• Middle States: 7.5 months (up from 6.9 months in April)
• Northeast: 7.3 months (downy from 7.9 months in April)
• South: 9.5 months (up sharply from 8.2 months last month)
• West: 7.7 months (down sharply from 8.8 months last week)

​The quarterly trends through the second month of Q2 are shown in the figure below:

Lastly, the backlog data by contractor size:

• <$30 million: 7.6 months (up fractionally from 7.4 months in April)
• $30-$50 million: 6.8 months (a substantial decrease from 8.5 last month)
• $50-$100 million: 9.5 months (down from last month's 10.3)
• >$100 million: 13.4 months (big increase from 10.9 months in April and the biggest backlog reported)

So, mixed bag with the general trend moving upwards. This is far from a bold prediction, yet my gut tells me that increasing backlogs will be another tailwind (if you are a contractor and like higher fees) or a head wind (if you, like me, are on the owner's side of the contract).

A year ago, the world seemed like it was ending and design and construction industry was grinding to a screeching halt. The The American Institute of Architects' Architecture Billings Index (ABI) hit a cataclysmic low of 29.5, mimicking the 10,000-point drop in the Dow Jones Industrial Average (a decline of almost one third). Today, is a lot different. Like the Dow, the ABI has rebounded and summited new heights. The April ABI reading came in at 57.9, the highest reading in my database which goes back to 2012. That is not the only high-level mark reached last month; read on for more details. But first, a reminder that we care about the ABI because it is a great nine-to-12 month leading indicator of construction activity. A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. And right now the ABI is accelerating like a rocket.

The regional ABI metrics were all up strongly except one but all have easily cleared the 50 hurdle:

• Northeast: 55 (up sharply from 50.8 in March)
• South: 58.3 (up from 55.8 last month and closing in on its peak of 58.4))
• Midwest: 60.6 (yes, 60.6, up from last month's 56.6 and a new record)
• West: 52.4 (down from March's 52.8. Sad trombone...)

The Midwest's gains are heartwarming in that that region typically lags the others. The sclerosis of the Rust Belt make be shaking off (ok, maybe I'm getting just a bit overly excited...). Anyway, it's good news.

The industry sector breakdown shows gains across the board:

• Multi-family Residential: 56.9 (up from 52.6 in March)
• Commercial/Industrial: 59.1 (up from 57 last month and a new record)
• Mixed Practice: 55 (up fractionally from 54.9 in March but up nonetheless)
• Institutional: 55.7 (up strongly from March's 54.4)

Lastly, Project Inquiries also scaled to a new peak, clocking in at 70.8. While this is a measure of people kicking the tires on projects, the enthusiasm shows that there is potential for the various ABI measures to go higher. I hope I did not just jinx the rally.

This data is great news, but there are some challenges for the industry to work through. Construction costs are rising as we have constraints on the supply of skilled labor and lumber costs continue to soar (I mean WTF?). These and other issues have people breathlessly talking about the dreaded "I" word (inflation), which would negatively alter the financial viability of projects. But for right now, let's celebrate that the design and construction industry are busy and that the pain of the ABI lows are a year in the rearview mirror.

With spring flowers came a torrent of demand for architectural services. The American Institute of Architects' Architecture Billings Index (ABI) increased for the fourth straight month and has been above 50 for two straight months, clocking in at a robust 55.6 for March 2021. Why is a value greater than 50 important? A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. Architectural billings are a great nine to 12 month leading indicator of construction activity. 55.6 is the highest ABI since December 2017. Fantastic!

As if March's overall ABI figure wasn't good enough news, all of the ABI subcategories were also above 50. It has been a very long time (February 2019 I believe). The regional data is as follows:

• Northeast: 50.8 (up sharply from 46.9 in February)
• South: 55.8 (up from 52.4 last month)
• Midwest: 56.5 (also up sharply from last month's 49.3; the biggest absolute gainer)
• West: 52.8 (up from February's 49.5)

The industry sector breakdown:

• Multi-family Residential: 52.6 (up from 48.3 in February)
• Commercial/Industrial: 57.0 (up from 50.5 last month; the highest since August 2017's 57.6)
• Mixed Practice: 54.9 (up from 52.5 in February)
• Institutional: 54.4 (a huge month-over-month gain, up from February's 47.8)

Does this recovery have steam? The project inquiries, coming in at 66.9, seem to indicate so. This is the highest that metric has been since I started following ABI in 2012.

There is not much color commentary needed. March was a great month and shows that there is a lot life in the AEC industry. 

Back in black
I hit the sack
I've been too long, I'm glad to be back
Yes, I'm let loose
From the noose
That's kept me hanging about
I've been looking at the sky
'Cause it's gettin' me high
Forget the hearse 'cause I never die
I got nine lives
Cat's eyes
Abusin' every one of them and running wild
-AC/DC "Back in Black"
Thanks for tolerating my trip back to high school head banging. Speaking of peaking, the American Institute of Architects' Architecture Billings Index (ABI) is back to where it was in February 2020 and has surged into positive territory, clocking a 53.3 for February 2021. A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The ABI is a leading indicator of commercial building construction by approximately nine to 12 months. Whew...we needed this little ray of sunshine.

To be clear, we are not totally our of the woods as there are still areas of weakness (sub 50 results), as evidenced by the regional data:

• Northeast: 46.9 (up sharply from 41.9 in January)
• South: 52.4 (up from 47.4 last month and the sole 50+ region)
• Midwest: 49.5 (also up sharply from last month's 42.2; the biggest absolute gainer)
• West: 49.5 (another big jump from January's 42.8)

For the industry sector breakdown, the balance between advancers and decliners was split 50/50:

• Multi-family Residential: 48.3 (up from 44.4 in January)
• Commercial/Industrial: 50.5 (up from 44.3 last month)
• Mixed Practice: 52.5 (up from 47.9 in January)
• Institutional: 47.8 (up from January's 39.9 and the biggest absolute gainer)

Project inquiries have been above 50 since August, but they pierced the 60 level in February.

All in all, pretty good news from the billings front, likely supported by larger positive macro trends (vaccination roll out, stimulus, Federal Reserve holding steady, and on and on...). It is nice to finally have some good news. That said, the construction industry still has some headwinds to watch (commodity prices and labor constraints to name but two). Let's worry about that next week. For now, let's just enjoy this month's ABI.

That title is a Jedi mind trick...yes, the American Institute of Architects' Architecture Billings Index (ABI) did slow its declines from last month, but they are still declining. The January 2021 ABI figure came in last week at 44.9, up from 42.3 in December. Bigger is better, however values less than 50 mean that billings are decreasing. The last time the ABA was above 50, meaning they were increasing, was February of last year (you know, before COVID put the United States into a state of chaos). Next month ought to be interesting. The ABI serves as an approximately nine to 12-month leading indicator for commercial building construction activity.

The ABI is way off its lows of April 2020, where it logged a dismal 29.5, yet there was another more modest decline in the last two months of 2020. This recent figure shows a positive reversal in that trend. That same post-cratering dip shows up in the project inquiries graph, but it too reversed in January 2021. 

The specific data is a collection of mixed bag results with some up from last month and others down. For the regional data, there are two advancers and two decliners. Unfortunately, I live in one of the decliners.

• Northeast: 41.9 (up from 38.8 in December)
• South: 47.4 (also up from 46.8 last month)
• Midwest: 42.2 (down from December's 43.6)
• West: 42.8 (down slightly from last month's 43.4)

For the industry sector breakdown, the decliners outnumbered the advancers 3 to 1:

• Multi-family Residential: 44.4 (down from 46.1 in December)
• Commercial/Industrial: 44.3 (the biggest decliner, down over 6% from 47.2 last month)
• Mixed Practice: 47.9 (down fractionally from 48 in December)
• Institutional: 39.9 (up from December's 38.5)

While institutional projects did not plumb the same depths as the three other sectors, it is clearly the laggard as the market corrects. The fits-and-starts of the ABI (and its subcategories) also loosely follows the Chicago Board of Options Exchange volatility index for stocks (VIX) which may suggest that billings are trending with greater economic sentiment (a theory I am wholly unable to prove/disprove but does make me wonder). Where as stock traders like volatility and the corresponding price changes, I am guessing most of us in the AEC world would prefer some stability. Hopefully the wild fluctuations are subsiding. Tune in next month for the one-year anniversary of the ABI's 38% drop to see how we have recovered since then.

If I could impose a New Year’s resolution on the design and construction industry, it would be for more work in 2021. Imagine my disappointment upon opening the American Institute of Architects (AIA) press release showing a decline in Architecture Billings Index (ABI). Then it dawned on me…this decline occurred in December. For the time being, the resolution is intact. Whether we should hold our collective breaths is debatable, but I hope we have purged the declines and are leaving them in 2020. The ABI for December was 42.6, a sizable decline from November’s 46.3. The AIA publishes the ABI as am approximately nine to 12-month leading indicator for commercial building construction activity. A value greater than 50 means that architecture billings are increasing; any value less than 50 means billings are decreasing. ​

Two very minor bright spots and two big losses in the regional indices:

• Northeast: 38.8 (up from 38.7 in November…any increase is good news)
• South: 46.8 (up from 46.7 last month. See previous bullet point)
• Midwest: 43.6 (down steeply from December’s 50.1. I blame the Packers losing in the playoffs. That’s how statistics works, right?)
  
• West: 43.4 (also down sharply from 48.3 in December. Blame it on the Rams?)

There’s one bad actor among the building types and it’s a bit unexpected:

• Multi-family Residential: 46.1 (down sharply from 52.2 in November, the second largest sector decline behind the Midwest. Not sure we can blame the Pack for this one)
• Commercial/Industrial: 47.2 (down slightly from 47.5 last month)
• Mixed Practice: 48 (down from 49.5 in November)
  
• Institutional: 38.5 (down from November's 41.9)

​The multi-family decline is particularly noteworthy. That sector has been the strongest for several years and responded rather well after cratering to an ABI of 30.3 in April as the COVID-19 pandemic was gripping the world. As is true for all data, one point does not signify a trend so no need to panic yet, but I’m very curious about next month’s number.
 
One last point: I bring up project inquiries every so often in these posts and December’s figure of 52.4 is curious. Not only is it above 50, but it increased (albeit slightly) from 52 in November. Before everyone gets too excited, the inquiries are just that: people inquiring about projects. Not much more than kicking the tires on an idea for a project. Additionally, the average inquiry index going back to January 2012 is 58.3, so 52.4 for December is comparatively shabby. All that said, the number of inquires is growing (signified by an index of greater than 50), so the interest in projects is there. I may be trying to generate optimism where it doesn’t exist, but I do see that as the silver lining in an otherwise dismal month. And technically, the ABI New Year’s resolution is still intact…fingers crossed for January.