Category: Construction + Economy

Architecture Billings Index Shows Early Signs of Improving Business Conditions

Finally, some good news. After a series of historic lows, the Architecture Billings Index (ABI) was up more than eight points in March. As a leading economic indicator of construction…

Finally, some good news. After a series of historic lows, the Architecture Billings Index (ABI) was up more than eight points in March.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9-12 month lag time between architecture billings and construction spending. AIA reported the March ABI rating was 43.7, up from the 35.3 mark in February. This was the first time since September 2008 that the index was above 40, but the score still indicates an overall decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 56.6.

“This news should be viewed with cautious optimism,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The fact that inquiries for new projects increased is encouraging, but it will likely be a few months before we see an improvement in overall billings. Architects continue to report a diversity of business conditions, but the majority is still seeing weak activity levels.”

Key March ABI highlights:

* Regional averages: South (43.4), Northeast (41.8), Midwest (37.5), West (36.1)
* Sector index breakdown: mixed practice (44.0), institutional (42.9), multi-family residential (39.4), commercial / industrial (35.0)

aia-billings-index

Comments Off on Architecture Billings Index Shows Early Signs of Improving Business Conditions

Construction Spending Falls 10% Below Last Year in February

Construction spending during February 2009 was estimated at a seasonally adjusted annual rate of $967.5 billion, 0.9% below the revised January estimate of $976.2 billion and 10% percent below the…

Construction spending during February 2009 was estimated at a seasonally adjusted annual rate of $967.5 billion, 0.9% below the revised January estimate of $976.2 billion and 10% percent below the February 2008 estimate of $1,075.3 billion.

During the first two months of this year, construction spending amounted to $135.5 billion, 10.9% below the $152 billion for the same period in 2008.

Spending on private construction was at a seasonally adjusted annual rate of $665.9 billion, 1.6% below the revised January estimate of $676.9 billion. Residential construction was at a seasonally adjusted annual rate of $275.1 billion in February, 4.3% below the revised January estimate of $287.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $390.7 billion in February, 0.3% above the revised January estimate of $389.5 billion.

In February, the estimated seasonally adjusted annual rate of public construction spending was $301.7 billion, 0.8% above the revised January estimate of $299.2 billion. Educational construction was at a seasonally adjusted annual rate of $86.9 billion, 1.7% above the revised January estimate of $85.5 billion. Highway construction was at a seasonally adjusted annual rate of $77.7 billion, 0.5% below the revised January estimate of $78 billion.

Residential construction is off 29.2% from the same period in last year, while nonresidential construction is actually still up 1.3%.

construction

Comments Off on Construction Spending Falls 10% Below Last Year in February

Architecture Billings Index Continues to Point to Difficult Conditions

Following another historic low score in January, the Architecture Billings Index (ABI) was up two points in February, but still pointing to a general lack of demand for design services….

Following another historic low score in January, the Architecture Billings Index (ABI) was up two points in February, but still pointing to a general lack of demand for design services.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI rating was 35.3, up from the 33.3 mark in January (any score above 50 indicates an increase in billings). The new projects inquiry score was 49.5.

“Despite a higher score than last month, we are likely to see light demand for new construction projects through much of the year,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead. Still, the improvement in the inquiries index does provide hope that some stalled projects will resurface in the near future.”

Key February ABI highlights:

Regional averages: West (36.4), South (35.5), Midwest (35.0), Northeast (32.3)
Sector index breakdown: mixed practice (40.1), institutional (36.8), multi-family residential (33.3), commercial / industrial (32.0)
Project inquiries index: 49.5

aia

Comments Off on Architecture Billings Index Continues to Point to Difficult Conditions

Construction Market Forecast: Nonresidential Construction Will Plummet, Begin 3+ Years of Contraction

Construction industry management consulting and investment banking firm FMI has released its Construction Outlook: First Quarter 2009 Report, available free online as a PDF document here. The outlook forecasts nonresidential…

Construction industry management consulting and investment banking firm FMI has released its Construction Outlook: First Quarter 2009 Report, available free online as a PDF document here.

The outlook forecasts nonresidential construction will plummet and begin at least three years of contraction. The bottom, in terms of both dollar volume and percent decline, will not be until 2010. Residential construction is not expected to recover until 2011.

Report highlights include:

• Project delays are four times the normal rate and are currently at 20% (up from three times in 3Q08).
• Project cancellations are five times the normal rate and are currently at 10% (doubled from 3Q08).
• An important bill to the outlook for construction is the America’s Better Classrooms Act, which provides $25 billion for 0% interest school construction bonds.
• The stimulus bill is not going to single-handedly save the construction industry.

Amidst all the economic doom and gloom, there are a few bright spots:

• Inflation has remained under control so far.
• Prices are down for most materials.
• The stimulus bill will help to mitigate some loss.
• There is still a large amount of construction being put in place.

Click here to get Construction Outlook: First Quarter 2009 Report.

fmi

“The construction industry is not only dependent on the stimulus bill. The general economy is a main driver for both residential and nonresidential construction. Real GDP decreased 6.2% in the fourth quarter … Consensus Forecasts predict that GDP will decline 2.1% for 2009 and then turnaround and increase 2.0% in 2010. We believe that these estimates are optimistic …” – Heather Jones, Construction Economist for FMI

Comments Off on Construction Market Forecast: Nonresidential Construction Will Plummet, Begin 3+ Years of Contraction

Sustainable Design a Fad?

I think that notion is being put to rest. In fact, green construction is expected to be a bright spot in the overall construction market during the current downturn and…

I think that notion is being put to rest. In fact, green construction is expected to be a bright spot in the overall construction market during the current downturn and beyond.

greenglobe1

Consider:

* According to Turner Construction’s 2008 Green Building Market Barometer survey of 754 commercial real estate executives, significant percentages of respondents view green buildings as having lower operating costs and higher building values, asking rents, occupancy rates and overall return on investment.

* According to the U.S. Green Building Council (USGBC), which administers the LEED green building rating system, 12 federal agencies and departments, 31 states and 122 cities—including New York, Los Angeles, Chicago, Boston and others—have made commitments to use or encourage LEED in construction of certain public and, in several notable cases, private buildings. Click here for the latest list.

* The stimulus package has included billions to convert Federal facilities into high-performance green buildings.

* Green construction is expected to be a bright spot during the current downturn in the overall construction market and beyond. McGraw-Hill 2009 Green Outlook estimates demand for green construction to be 10-12% of the current commercial and institutional building market, predicting that demand will increase to 20-25% by 2013, or $96-140 billion.

As a primary building system, lighting has a critical role to play in sustainable buildings.

How do you know if lighting is “sustainable”? At first glance, the term appears to be a fancy way of saying energy-efficient lighting, but it’s become more than that. There has been an effort in the green building movement to tie efficient lighting to lighting practices that have been demonstrated by research to positively impact satisfaction with the built environment. LEED, for example, encourages daylighting and individually controllable lighting.

3 Comments on Sustainable Design a Fad?

LEED 2009 is Coming Soon

LEED 2009 (LEED 3.0) is coming April 27. The new version of the LEED rating system will incorporate all of the rating systems that address commercial buildings–New Construction, Commercial Interiors,…

LEED 2009 (LEED 3.0) is coming April 27.

Earth in hand

The new version of the LEED rating system will incorporate all of the rating systems that address commercial buildings–New Construction, Commercial Interiors, Schools and Existing Buildings: Operations &
Maintenance–into three LEED 2009 systems:

* Green Building Design & Construction
* Green Interior Design & Construction
* Green Building Operations & Maintenance

Most credits will be very familiar, but LEED 2009 includes some important changes:

* All prerequisites and credits have undergone an alignment and harmonization, providing a pool of prerequisites and credits for all LEED Rating Systems
* Various credits are re-weighted based on impact on environment and health, with improving energy efficiency and reducing carbon emissions being the primary goal
* Regionalization of certain credits

There are some significant lighting changes related to the prerequisite and credits available or energy reduction compared to 90.1 (2007 now instead of 2004), light pollution reduction and daylighting and views.

To see the latest drafts of the new rating systems for New Construction and Existing Buildings, click here. Later on, I’ll provide a writeup on specifically what’s new for lighting.

Comments Off on LEED 2009 is Coming Soon

Electroindustry Business Confidence Improves, But Remains in Contractionary Territory

NEMA’s Electroindustry Business Confidence Index (EBCI) for current conditions gained ground for a second month in a row in February, rising to 27.3 points from 20 in January. In spite…

NEMA’s Electroindustry Business Confidence Index (EBCI) for current conditions gained ground for a second month in a row in February, rising to 27.3 points from 20 in January. In spite of the recent rebound, the business environment remains bleak. February’s reading was far below the “breakeven” mark of 50 points and indicates a steep and ongoing deterioration in electroindustry conditions.

ebci

The EBCI for future North American conditions was little changed for a second consecutive month. The index slipped a slight 1.1 points to 36.4 in February and has held in a tight range since December. Though far above the cyclical low of 17.5 seen in the October aftermath of Wall Street’s collapse, the index remained firmly in contractionary territory as survey panelists on balance expect business conditions to erode well into the second half of 2009.

Click here for the complete February 2009 report in PDF format.

The Electroindustry Business Confidence Index gauges the business confidence of the electroindustry in Asia, Europe, North America, and Latin America, and is based on the results of a monthly survey of senior managers at NEMA member companies. Those companies represent more than 80% of the electroindustry, according to NEMA.

Comments Off on Electroindustry Business Confidence Improves, But Remains in Contractionary Territory

Housing Starts Regain Ground in February, But Builder Sentiment Remains Unchanged in March

Nationwide housing starts turned upward for the first time in eight months in February, rising to a seasonally adjusted annual rate of 583,000 units in February, a gain of 22.2%….

Nationwide housing starts turned upward for the first time in eight months in February, rising to a seasonally adjusted annual rate of 583,000 units in February, a gain of 22.2%.

To put this in perspective, however, the gain was primarily due to a big bump in the often-volatile multifamily market–an 82.3% surge to a 226,000-unit pace. Single-family housing starts, meanwhile, were up only about 1% to 357,000 units.

National Association of Home Builders (NAHB) Chief Economist David Crowe adds the gain “only reflects a modest rebound from January, which was the worst month in history for new-home production.”

Additionally, privately owned housing starts are 47.3% below the revised February 2008 rate.

NAHB Chairman Joe Robson, a home builder from Tulsa, OK, sees some room for hope. “Builders did pull a larger volume of single-family permits in February, suggesting a glimmer of hope for the prime home buying season, which is near at hand,” he points out. “That said, we realize there’s a need to be extremely cautious in terms of new building activity going forward, because there’s still quite a lot of inventory out there that needs to be absorbed as foreclosures continue to flood the market in many areas.”

Building permits, meanwhile, rose 3% overall to a seasonally adjusted annual rate of 547,000 units in February. This reflected an 11% gain in single-family permits to 373,000 units and a 10.8% decline in multifamily permits to 174,000 units. By region, building permits recorded a 27.6% gain in the Northeast, no change in the Midwest, a nearly 6% improvement in the South, and a 13.6% decline in the West in February.

housing_starts

While these numbers–and the recent economic stimulus package, which includes a first-time home buyer tax credit–offer some hope the residential market may be turning a corner, builder sentiment remained unchanged in March, deep in very weak territory, suggesting continuing soft demand, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI held steady at 9 in March, marking a fifth consecutive month of single-digit readings.

“The economy continues to be the main drag on home sales activity right now, in terms of consumer confidence across most of the country,” Crowe says. “What’s more, home builders report that tight credit conditions are posing a further hurdle, especially for potential first-time buyers, while potential trade-up buyers are finding it very tough to sell their existing homes so they can make a move.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI’s component indexes were unchanged in March, with the index gauging current sales conditions holding at 7 and the index gauging sales expectations in the next six months holding at a record-low 15. Meanwhile, the index gauging traffic of prospective buyers declined two points to 9. Three out of four regions saw no change in their HMI reading in March. The Midwest, South and West each held at near-record lows of 8, 12, and 5, respectively. The Northeast rose a single point from a record low of 8 in February to 9 in March.

hmi_index

Comments Off on Housing Starts Regain Ground in February, But Builder Sentiment Remains Unchanged in March

Construction Spending Tumbles in January

The U.S. Census Bureau of the Department of Commerce recently announced that construction spending during January 2009 was estimated at a seasonally adjusted annual rate of $986.2 billion, 3.3% below…

The U.S. Census Bureau of the Department of Commerce recently announced that construction spending during January 2009 was estimated at a seasonally adjusted annual rate of $986.2 billion, 3.3% below the revised December estimate of $1.02 trillion. The January figure is 9.1% below the January 2008 estimate of $1.085 trillion.

Spending on private construction was at a seasonally adjusted annual rate of $682.6 billion, 3.7% below the revised December estimate of $709 billion. Private residential construction was at a seasonally adjusted annual rate of $291.5 billion in January, 2.9% below the revised December estimate of $300.3 billion. Private nonresidential construction was at a seasonally adjusted annual rate of $391 billion in January, 4.3% below the revised December estimate of $408.7 billion.

In January, the estimated seasonally adjusted annual rate of public construction spending was $303.7 billion, 2.3% below the revised December estimate of $311 billion. Educational construction was at a seasonally adjusted annual rate of $85.5 billion, 0.6% above the revised December estimate of $85 billion.

construction-january-2009

Comments Off on Construction Spending Tumbles in January

Architecture Billings Index Hits Another Historic Low

On the heels of a modest uptick in December, the Architecture Billings Index (ABI) dropped to a historic low level in January. As a leading economic indicator of construction activity,…

On the heels of a modest uptick in December, the Architecture Billings Index (ABI) dropped to a historic low level in January.

As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.

The American Institute of Architects (AIA) reported the January ABI rating was 33.3, down from the 34.1 mark in December (any score above 50 indicates an increase in billings). The inquiries for new projects score was 43.5.

Key January ABI highlights:

* Regional averages: West (38.3), Midwest (34.6), South (34.4), Northeast (29.8)

* Sector index breakdown: mixed practice (39.6), institutional (37.1), commercial / industrial (33.8), multi-family residential (29.5)

* Project inquiries index: 43.5

“Now that the stimulus bill has passed and includes funding for construction projects, as well as for municipalities to raise bonds, business conditions could improve,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “That said, until we can get a clearer sense of credit lines being made available by banks, it will be hard to gauge when a lot of projects that have been put on hold can get back online.”

abi

The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics & Market Research Group. Based on a comparison of data compiled since the survey’s inception in 1995 with figures from the Department of Commerce on Construction Put in Place, the findings amount to a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction activity. The diffusion indexes contained in the full report are derived from a monthly survey sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month.

Comments Off on Architecture Billings Index Hits Another Historic Low

Type on the field below and hit Enter/Return to search