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The good news is that there's only nine days left in 2020. That's it, that's all I have. But, if you are curious about architectural billings, proceed with caution. The American Institute of Architects (AIA) publishes the Architecture Billings Index (ABI), which serves as a leading indicator of commercial building construction by approximately nine to 12 months. A value greater than 50 means that architecture billings are increasing; any value less than 50 means billings are decreasing. Spoiler alert: there is more declining than increasing. If it is not clear I am completely over 2020. The overall ABI for November was 46.3, a decline from 47.5 in October. This is the first decline since April.  All is not lost as there are some minor bright spots in the regional data if you squint:
 And then we get to the industry sector breakdown...keep on squinting:
 So there are a few bright spots as we glide through the holiday season, but overall we ended the calendar year weakly. Wake me up when it's 2021.
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Let's get the bad news out of the way: the American Institute of Architect's Architectural Billings Index (ABI) clocked in at 47.5 for October. That is an increase over the previous month's reading of 47, yet a value less than 50 signifies that billings are decreasing (conversely, and this will be important if you continue reading, values greater than 50 mean billings are increasing). The ABI is a leading indicator of commercial building construction by approximately nine to 12 months, so it is an important leading economic indicator for the commercial building construction industry. Project inquiries increase their streak of being above 50 to three months with October registering a measuring in at 59.1. Inquiries represent interest in projects but not the actual start of design.  Now let's pivot towards some good(-ish) news: In terms of ABI measures with respect to geographic regions, all regions increased from the previous month and the West pierced the 50 level, being the first region to do so since February:
 Now that I have your attention with some moderately good news, here's some even more moderately good news: all four industry sectors saw increases and TWO broke 50:
 Given COVID, these gains are heartening and the industry is certainly moving in the right direction. That said, as I type this, we're staring at a giant third wave of COVID infections, the never ending post-election hangover and Congress heading for vacation without seriously considering a relief package. Hopefully this compendium of issues does not derail the planning and design of commercial buildings.
While COVID-19 is still dominating the headlines around the world, the construction industry still shows pent-up demand in the United States. This morning, the Associated Builders and Contractors (ABC) reported that its Construction Backlog Indicator for October increased 0.2 months from the previous month. While October 2020’s overall backlog of 7.7 months is 1.2 months lower than the October 2019 measure, it remains remarkably stable given the economic uncertainty surrounding the nation. The graphs below display quarterly data. October is the first month for the last quarter of the year, so Q4 is incomplete.  Let’s dig into the detailed backlogs, starting with the industry sector breakdown for October:
 Turning to geographic area, there seems to be a bit of give-and-take with two regions up and one down sharply and one holding fairly steady:
 Last are backlog data by contractor size:
 Also in the news today is Dodge Data & Analytics reporting that its 2021 Construction Outlook is pointing to $771 billion in construction starts, a 4% increase from last year. Dodge is expecting a drop in multi-family construction of 1%. This is more likely a sign of that superheated segment coming to the end of its cycle than the negative affects of COVID-19. The other sectors expected to see declines are predictable: retail and hotels. Institutional and public sector construction are predicted to be basically flat or see modest gains, which is also expected given that government aid is uncertain, a trend likely to continue with COVID-19 and the possibility of future gridlock between the Executive Branch and Congress. Manufacturing is also expected to be flat. Private construction is expected to increase with the usual suspects leading the way. Warehouses and data centers are expected to increase 5% as the FAANG companies (Facebook, Amazon, Apple, Netflix and Google) and their smaller peers continue to dominate while utilities are expected to increase a whopping 35% due to expected starts liquid natural gas exporting facilities and wind farms.
The WELL Expansion is going vertical. The first structural steel column was set last week while the footings are being placed on the Student Health Center side of the building. The team is working furiously to get out of the ground before the weather turns wet. The whipsawing in the construction industry continues. Last month the good news/bad news was slow architectural billings but increased contractor backlogs. This month is just the opposite. So very 2020. Per usual, let's start with the American Institute of Architect's Architectural Billings Index (ABI). Per the usual refresher, the ABI is a leading indicator of commercial building construction by approximately nine to 12 months. A value greater than 50 means that architecture billings are increasing; any value less than 50 means billings are decreasing. In September the ABI increased sharply from 40 to 47 (yay!) but is still less than 50 so billings are still decreasing (boo!). The trend is definitely positive and the rebound off of April's bottom does not appear to a false narrative. Project inquiries are on a two month streak above 50 with September clocking in at 57.2. Inquiries represent interest in projects but not the actual start, but the sharp increases since April are a positive sign. Project inquiries are on a two month streak above 50 with September clocking in at 57.2. Inquiries represent interest in projects but not the actual start, but the sharp increases since April are a positive sign.  Project inquiries are on a two month streak above 50 with September clocking in at 57.2. Inquiries represent interest in projects but not the actual start, but the sharp increases since April are a positive sign.  While none pierce the 50 level, the regional data shows nice increases from last month. It is a little odd to see the South in third place given its torrid growth over the past few years. The breakdown for each region is as follows:
 By building type, multi-family breached the 50 level and continues to lead all other sectors. The September stats for all are:
 Now let's look at contractor backlogs as reported by the Associated Builders and Contractors. After an increase in August, September saw decreases. The graphs below represent quarterly data through Q3 2020 so the trends continue to look negative. Contractors now have an overall backlog of 7.5 months in September, down from 8 months in August.  The details continue to be choppy. Let's start with the details by industry sector for September:
 Interestingly, while I previously mentioned it is odd to see ABI for the South in third place, the backlog for the South was the only gainer this month. The details are as such:
 The closing data are backlog by contractor size. The month-to-month data decreased with one exception:
 2020 is such a different environment that 2019 but the construction industry has stabilized after some sharp economic declines earlier this year. Given the continued drama around COVID and the upcoming presidential election, hopefully the industry holds steady with two small steps forward for every one small step backwards.
The building has been opened up and the geopiers were quickly installed last weekend (I apologize for missing that...). Construction Industry Update: Architecture Billings Flat While Contractor Backlogs Increase9/23/2020 We're three quarters into the month which means it's time to take a look at some economic indicators for the construction industry. Let's start with the leading indicator, the American Institute of Architect's Architectural Billings Index (ABI). As a refresher, the ABI is a leading indicator of commercial building construction by approximately nine to 12 months. A value greater than 50 means that architecture billings are increasing; any value less than 50 means billings are decreasing. For the third month in a row, the ABI checks in at 40. Still decreasing but at least it's holding steady and up from the low of 29.5 in April.  Project inquiries climbed over the 50 hurdle, but recall that inquiries basically represent people interested in projects, not those starting them. Still, we'll take good news however it comes.  The regional data shows modest increases with the exception of the northeast which turned south after four months of increases. The northeast has consistently lagged its peers. The breakdown for each region is as follows:
 By building type, multi-family continues to be the best performing sector, albeit while still having declining billings. Mixed-practice was the only decliner. The August stats for all are:
 Switching gears from designers to contractors, a bright spot, albeit small, is that contractor backlogs, as reported by the Associated Builders and Contractors, increased last month. The data below is quarterly so the trends still look negative, but we also have one month remaining in Q3 so we may see these curves invert in the right direction next month. Contractors now have an overall backlog of eight months in August, up from 7.8 months in July.  The details are a bit choppy. Let's start with the details by industry sector for August:
 For geographic region, the data is also choppy with bright spots even though the quarterly curves below trend downward. The details are as such:
 Lastly, the backlog by contractor size is below. The month-to-month data includes some relatively large extremes:
 It's not bold to predict that there could be some more turbulence ahead with election posturing, a possible resurgence of COVID-19 as students return to work and the western states on fire, but in these anxious days, the ABI not decreasing and contractor backlogs increasing, even slightly, isn't too shabby.
Over the past few weeks, the demo and site work packages have been going full speed at the Sac State WELL building. I'll do a more detailed write-up later, but the short version is that the building will be expanded on two sides (the loading dock side and the University's Health Center side). The pix below are sure to be the first in many I will be posting over the next year.   Demo and site work at the rear (loading dock) side of the building.   Selective demo on the building envelop on the Student Health Center side or the building. This side will be extended outward.  Replacing some concrete. This area will be receiving a new stairway to improve egress.
Today in Sacramento, it's supposed to get to 106 degrees and the air is unhealthily thick with smoke and ash from wildfires and I say to myself, "well, it cannot get any worse." It's 2020. Of course it can. First came the news that infrastructure project starts fell 31% in July. While the article goes on to say the news isn't all bad, it's hard to casually move past the nosedive, even for a month, of a major component of the overall construction market. Particularly when it is the same infrastructure that almost everyone, even political cats and dogs who concur on almost nothing, agree we should be providing more money towards. Combine this drop with the decrease in contractor backlogs and confidence in July and it is hard to see the silver lining. Because it is that time of the month, I decided to check on the American Institute of Architect's Architectural Billings Index (ABI) to see what our favorite construction leading economic indicator is up to. Sure enough, the July figures were released this morning. Before the big reveal, it is important to note that the ABI is a leading indicator of commercial building construction by approximately nine to 12 months. A value greater than 50 means that architecture billings are increasing; any value less than 50, as is the case for the past few months, means billings are decreasing. For July, the song remains the same, with a repeat of June's 40 figure. But hey, it's not falling!  Next month's results will be very interesting. In June I was concerned with a dead cat bounce. A downward trend in the August ABI may hint to that, while, conversely, an increase may indicate we are climbing out of the hole, albeit with fits and starts. My curiosity, having kicked into high gear, led me to dig into some AIA data I have never shared in this blog. The first figure shows data for project inquiries.  Inquiries are almost to 50, yet inquiries are just that: people kicking the tires on potential projects. Don't get me wrong, the trend is certainly positive but it doesn't measure any commitment on the part of owners to start projects any more than test driving a car indicates a commitment to buy. The better figure for gauging that is for design contracts. As luck would have it, AIA tracks that as well.  That's where the luck ends. The rate of new contracts actually declined, from 44 in June to 41.7 in July. Design contracts are a leading indicator of billings (leading indicator on leading indicator), so there's an argument to be made by the pessimists that we are in for rockier times. We shall see. For the regionals:
 The Sector Averages for July 2020 are as follows:
Some economic indicators are up, others down (sharply in some cases) and a whole lot of let's-see-what-happens-next-month. In other words, your daily reminder it's 2020. Let’s start with architecture billing. I smell a positive trend! The American Institute of Architects (AIA) Architecture Billing Index (ABI) is continuing to rebound, posting a 40 in June, up from 32 in May and 29.5 in April. While the trend is good, let’s not forget that 40 is still pretty lousy. As a reminder, ABI is a leading indicator of commercial building construction by approximately nine to 12 months. A value greater than 50 means that architecture billings are increasing; any value less than 50 means billings are decreasing, which is the case for the past four months. The overall ABI is as follows:  Still, up is up and it seems the AEC industry is starting to adjust to a COVID-dominated world. As for the regional breakdown:
 The Sector Averages for June 2020 are as follows:
 So on the one hand, we are clearly numerically up from the lows experienced in April. On the other hand, the scores are below 50 across the board, demonstrating that billings are shrinking (just not as fast). How about contractor backlog? If the ABI represents what may happen in about a year (the hope), then what do contractor backlogs (the promise) look like? The graphs below show a decrease in contractor backlogs, but the x-axis is in quarters. The good news is that, according to the Associated Builders and Contractors, collectors of the backlog data, backlogs increased last month and optimism is rebounding.    Backlogs are down considerably from their peaks, but what’s missing (and possibly smoothed out due to the quarterly vs. monthly data) are the huge drops we witnessed in the various ABI measures. I don’t know this for a fact, but I highly suspect that this is due to the relative ease of canceling (or not starting) design as opposed to the relative difficulty in terminating projects, particularly large projects (notice the line for $100 million + projects is consistently higher than others) once a general contractor is selected. This is particularly the case for public-sector projects, many of which take years to get approval from and once funds are allocated, they are typically locked in place (infrastructure, which is commonly publicly-financed, actually increased its backlog last quarter).
All in all, we seem to be off the bottom and it doesn’t appear to be a false bottom (fingers crossed). I speculate that the ABI figures will remain under 50 as we pass the COVID-19 economic kidney stone, but any climbing towards 50, no matter how tiny, will help the AEC industry weather this storm. |
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