Category: Construction + Economy

Bloomberg: Is the Supply Chain Crisis in the US Peaking?

Bloomberg columnist Brooke Sutherland speculated that the supply chain crisis has peaked in the US, as evidenced by declining shipping costs and a reduction in wait times at the Port of Los Angeles.

Bloomberg columnist Brooke Sutherland speculated that the supply chain crisis has peaked in the US, as evidenced by declining shipping costs and a reduction in wait times at the Port of Los Angeles.

The supply-chain crunch appears to have already peaked in the U.S. When I first wrote this in mid-October, it felt like a bold assessment. Over the past two years, just about anything that could go wrong with global supply chains has gone wrong, from volatile swings in demand, a wave of extreme weather events and even a container ship getting stuck in the Suez Canal. But evidence keeps piling up to suggest that the U.S. is slowly but surely making progress in easing freight congestion and supply shortages.

Check it out here.

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AIA Report: Demand for Design Services Moderates But Remains Strong

Architecture firms reported increasing demand for design services in October 2021, according to The American Institute of Architects (AIA).

Architecture firms reported increasing demand for design services in October 2021, according to The American Institute of Architects (AIA).

The ABI score for October was 54.3. While this score is down slightly from September’s score of 56.6, it still indicates very strong business conditions overall (any score above 50 indicates an increase in billings from the prior month). During October, scoring for both the new project inquiries and design contracts expanded, posting scores of 62.9 and 58.0 respectively.

“Unlike the economy-wide payroll figures, architecture services employment has surpassed its pre-pandemic high,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Staffing continues to be a growing concern at architecture firms and may serve to limit their ability to take on new projects.”

Key ABI highlights for October include:

* Regional averages: Midwest (61.9); South (58.2); West (53.4); Northeast (48.6)
* Sector index breakdown: mixed practice (58.7); commercial/industrial (57.4); multi-family residential (55.8); institutional (51.4)

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Dodge Construction Momentum Index Jumps in October

The Dodge Momentum Index increased 10% in October to 181.2 (2000=100), from the revised September reading of 164.6.

The Dodge Momentum Index increased 10% in October to 181.2 (2000=100), from the revised September reading of 164.6. The Momentum Index, issued by Dodge Construction Network, is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. In October, commercial planning rose 14% and institutional gained 3%.

The value of nonresidential building projects entering planning has staged a solid recovery this fall. It has lifted the Momentum Index to its highest level in nearly 14 years, following a near-moribund summer of activity. The commercial sector has shown strength, having reached its highest level since the inception of the Index. The October gain in the Momentum Index was driven by increased planning in warehouses, offices, and healthcare structures. Compared to a year earlier, the Momentum Index was 47% higher in October 2021. The commercial planning component was 59% higher, and institutional was 26% higher.

A total of 20 projects with a value of $100 million or more entered planning in October. The leading commercial projects were a $450 million Walmart Distribution Center in Lyman, SC, and a $400 million Facebook data center in Los Lunas, NM. The leading institutional projects were the second and third phases of the California Northstate University Medical Center in Sacramento, valued at $500 million for each phase.

The dollar value of projects in the planning stage is impressive and portends a healthy rise in nonresidential building construction starts on tap for 2022. However, that expectation must be balanced against rising material costs, shortages of key goods, and a lack of skilled labor that will work to keep growth rates modest next year.

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AIA: Demand for Design Services Continues to Increase in September

Architecture firms continue to report increasing demand for design services in September, according to The American Institute of Architects (AIA).

Architecture firms continue to report increasing demand for design services in September, according to The American Institute of Architects (AIA).

The Architecture Billings Index (ABI) score for September was 56.6, which is up from August’s score of 55.6. (Any score above 50 indicates an increase in billings from the prior month.) During September, scoring for both the new project inquiries and design contracts moderated slightly, but remained in positive territory, posting scores of 61.8 and 54.7 respectively.

“The ABI scores over the last eight months continue to be among the highest ever seen in the immediate post-recession periods that have been captured throughout the index’s history,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “However, it’s unlikely that revenue increases at architecture firms can sustain this pace. Given that growth in both new design contracts and project inquiries have moderated in recent months, we expect to see a similar path for the ABI.”

Key ABI highlights for September include:

  • Regional averages: Midwest (57.7); South (57.0); West (56.0); Northeast (51.5)
  • Sector index breakdown: mixed practice (58.8); commercial/industrial (58.1); multi-family residential (56.1); institutional (53.5)

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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DOE Releases Initial 2018 Commercial Buildings Energy Consumption Survey Results

Newly released data tables from the Energy Information Administration’s 2018 Commercial Buildings Energy Consumption Survey (CBECS) provide building characteristics information for the estimated 5.9 million U.S. commercial buildings in 2018.

Newly released data tables from the Energy Information Administration’s 2018 Commercial Buildings Energy Consumption Survey (CBECS) provide building characteristics information for the estimated 5.9 million U.S. commercial buildings in 2018.

Building characteristics data tables include number of workers, ownership and occupancy, structural characteristics, energy sources and uses, energy related building features, and more.

In the lighting side, it shows us that adoption of LED lighting and occupancy sensors have increased considerably in terms of lighted commercial floorspace, with all traditional sources declining, notably linear fluorescent.

I wrote up a detailed look at the salient building and lighting data available in this most recent version of the CBECS for the Lighting Controls Association. Check it out here.

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Dodge Momentum Index Recovers in September

The Dodge Momentum Index gained 11% in September to 164.9 (2000=100) from the revised August reading of 148.0. The Momentum Index, issued by Dodge Construction Network, is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

The Dodge Momentum Index gained 11% in September to 164.9 (2000=100) from the revised August reading of 148.0. The Momentum Index, issued by Dodge Construction Network, is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The commercial planning component increased by 13% in September, while the institutional component rose 8%.

Nonresidential building projects entering planning staged a solid recovery in early 2021, as the economy began to awaken from its pandemic-induced slumber. Entering summer, those gains turned to losses as higher material prices and shortages of labor and goods weighed on the construction sector. The strength in projects entering planning was widespread during the month, with most sectors moving higher. Excluding healthcare, which experienced a downshift in the dollar value of planning projects in recent months. On a year-over-year basis, the Momentum Index was 30% higher than September 2020; the commercial component was up 32%, while institutional planning was 25% higher.

The gain in the Momentum Index and its components in September is certainly good news and a sign that owners and developers are looking past the current concerns over pricing, Delta, and politics and are moving forward with projects to meet demand. This does not mean there are no problems ahead for the sector. Month-to-month volatility in the data is likely to remain for some time.

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Architecture Billings Continue to Increase

The Architecture Billings Index (ABI) recorded its seventh consecutive positive month in August 2021, according to The American Institute of Architects (AIA).

The Architecture Billings Index (ABI) recorded its seventh consecutive positive month in August 2021, according to The American Institute of Architects (AIA).

The ABI score for August was 55.6, up from July’s score of 54.6. Any score above 50 indicates an increase in billings from the prior month. During August, scoring for both the new project inquiries and design contracts moderated slightly but remained in positive territory, posting scores of 64.7 and 56.6 respectively.

“The surge in design activity continued in August, signifying an expected upturn in construction activity in the fourth quarter and continuing into 2022,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “This expected expansion will magnify the already serious problems of price inflation and availability of many construction products and materials, as well as the emerging labor shortages in the industry.”

Key ABI highlights for August include:

* Regional averages: West (57.2); Midwest (55.2); South (52.5); Northeast (51.7)
* Sector index breakdown: mixed practice (56.0); commercial/industrial (54.7); institutional (54.4); multi-family residential (54.3)

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Dodge Momentum Index Loses Steam in August

The Dodge Momentum Index dropped 3% in August to 148.7 from the revised July reading of 154.0. The commercial planning component lost 2% in August, while the institutional component fell by 6%.

The Dodge Momentum Index dropped 3% in August to 148.7 from the revised July reading of 154.0. The commercial planning component lost 2% in August, while the institutional component fell by 6%.

The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

Projects entering the earliest stages of planning have declined following the torrid pace set in the spring. The decline in August was the third consecutive drop in the Momentum Index, which is now off 14% from the most recent high in May, since May the commercial component is down 10% and the institutional component is 22% lower.

This reversal comes as prices for materials used in nonresidential buildings increase in combination with a shortage of labor and a rising number of new COVID-19 cases from the Delta variant, all working in concert to undermine confidence in the fledgling construction recovery. There were some pockets of strength in August, however, as more data center, education and warehouse projects moved into planning relative to the prior month. Additionally, the overall level of the Momentum Index is 19% higher than one year ago; institutional planning was up 17% and commercial planning was 20% higher than last year.

Despite the recent declines in the Momentum Index, it is still too early to call this a retrenchment or a new cyclical downturn. Demand for nonresidential buildings remains weak, but the recent rising number of new COVID cases should not cause the same amount of disruption as previous waves did. As the economy continues to trudge forward, momentum will return to the construction sector and moderate growth in projects entering planning will return.

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AIA: Demand for Design Activity Continues to Expand

The Architecture Billings Index (ABI) recorded its sixth consecutive positive month in July 2021, according to The American Institute of Architects (AIA).

The Architecture Billings Index (ABI) recorded its sixth consecutive positive month in July 2021, according to The American Institute of Architects (AIA).

The ABI score for July was 54.6. While this was down slightly from June’s score of 57.1, it still indicates very strong business conditions overall (any score above 50 indicates an increase in billings from the prior month). Scoring for new project inquiries also declined in July but remained near its all-time high at 65.0. The score for new design contracts was essentially unchanged from June to July with a score of 58.0.

“In prior business cycles, architecture firms generally saw their project work soften quickly and then recover slowly,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “So the strength of this recovery is unprecedented. Firm leaders who have leaned into this economic upturn by reinvesting in their firms by hiring staff and upgrading their technology, will likely have a better year than those that anticipated a slower recovery.”

Key ABI highlights for July include:

  • Regional averages: Midwest (58.3); West (56.0); South (54.6); Northeast (54.1)
  • Sector index breakdown: commercial/industrial (58.4); institutional (55.4); multi-family residential (54.7); mixed practice (54.4)

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

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Dodge Momentum Index Retracts in July

The Dodge Momentum Index fell to 155.8 (2000=100) in July, a 6% decline from the revised June reading of 164.9. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

The Dodge Momentum Index fell to 155.8 (2000=100) in July, a 6% decline from the revised June reading of 164.9. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

Both components of the Momentum Index fell in July. Commercial planning fell 3%, while institutional planning dropped 9%.

The Momentum Index posted strong gains through much of the winter and spring as the economy and building markets began to stabilize following the recession. While the economy has continued its forward progress through the summer, the Index has regressed somewhat as higher material prices and shortages of skilled labor continue to exert a strong influence over the construction sector. Despite the declines in June and July, the Momentum Index remains near levels last seen in 2018. Compared to a year earlier, the Momentum Index was 25% higher than in July 2020 — institutional planning was up 27% and commercial planning was 25% higher than last year.

A total of 11 projects with a value of $100 million or more entered planning during July. The leading commercial projects were a $240 million Microsoft Data Center in San Antonio, TX and a $200 million Amazon, Inc. fulfillment center (Project Basie) in Woodburn, OR. The leading institutional projects were the $225 million Baptist Health Hardin Medical Pavilion in Elizabethtown, KY and the $200 million AdventHealth Narcoossee campus in Orlando, FL.

The pressures caused by higher material prices and labor are unlikely to ease anytime soon and, when added to the rising number of COVID-19 cases caused by the Delta variant, raises concerns that the nascent recovery in construction may stall in the months ahead.

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