Category: Construction + Economy

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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AIA Mid-Year Forecast: Softer Nonresidential Construction Decline in 2021, Healthy Growth in 2022

Pent-up demand from the pandemic is creating a general spending surge that is helping to improve the outlook on construction spending over the next two years, according to the American Institute of Architects (AIA).

Pent-up demand from the pandemic is creating a general spending surge that is helping to improve the outlook on construction spending over the next two years, according to the American Institute of Architects (AIA).

After nonresidential construction spending declined by about two percent last year, the AIA Consensus Construction Forecast Panel, in its mid-year update, is projecting that spending will decline an additional 3.9% this year, which is an improvement from the forecasted 5.7% decline reported in January. Nonresidential construction spending is expected to increase 4.6% in 2022.

The strongest design sector performers for the remainder of this year are expected to be health care facilities, up 1.4 percent, while a few other sectors should see only minimal declines, like retail, religious, and education. However, in 2022, virtually all the nonresidential building sectors are expected to see healthy growth, paced by lodging, as well as amusement and recreation, both of which saw steep declines during the pandemic.

“Even while momentum is developing behind most of the nonresidential building sectors, there are several potential potholes on the road to a construction recovery,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Inflation is back on the radar screen given the surge in consumer spending, as well as the growing federal debt levels. Also, the global supply chain continues to face serious challenges that persist even well after initial pandemic related disruptions have largely subsided.”

Click here to see the individual and consensus forecasts.

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Architecture Billings Index Robust Growth Continues

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

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

AIA’s Architecture Billings Index (ABI) score for June remained at an elevated level of 57.1 in June (any score above 50 indicates an increase in billings). During June, the new design contracts score also remained positive at 58.9 but was not quite as strong as the 63.2 reading in May. New project inquiries logged another near-record high score at 71.8, compared to 69.2 in May.

“With the current pace of billings growth near the highest levels ever seen in the history of the index, we’re expecting a sharp upturn in nonresidential building activity later this year and into 2022,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, as is often the case when market conditions make a sudden reversal, concerns are growing about architecture firms not being able to find enough workers to meet the higher workloads. Nearly six in 10 firms report that they are having problems filling open architectural staff positions.”

  • Regional averages: Midwest (62.0); West (59.7); South (57.3); Northeast (53.2)
  • Sector index breakdown: commercial/industrial (61.0); multi-family residential (57.9); institutional (57.3); mixed practice (56.4)
  • Project inquiries index: 71.8
  • Design contracts index: 58.9

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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Increasing Design Activity Signals Construction is Recovering

Continuing its strong rebound, the Architecture Billings Index (ABI) recorded its third consecutive month of positive billings, according to The American Institute of Architects (AIA).

Continuing its strong rebound, the Architecture Billings Index (ABI) recorded its third consecutive month of positive billings, according to The American Institute of Architects (AIA).

AIA’s ABI score for April rose to 57.9 compared to 55.6 in March (any score above 50 indicates an increase in billings). Neither score has been achieved since before the Great Recession. During April, new project inquiries and new design contracts reached record highs with scores of 70.8 and 61.7 respectively.

“This recent acceleration in the demand for design services demonstrates that both consumers and businesses are feeling much more confident about the economic outlook,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The pent-up demand for new and retrofitted facilities is keeping architecture firms in all regions and building sectors busy.”

Key ABI highlights for April include:

  • Regional averages: Midwest (60.6); South (58.3); Northeast (55.0); West (52.4)
  • Sector index breakdown: commercial/industrial (59.1); multi-family residential (56.9); institutional (56.7); mixed practice (55.0)
  • Project inquiries index: 70.8
  • Design contracts index: 61.7

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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Demand for Design Services Continues Positive Trend

In March 2021, the Architecture Billings Index (ABI) logged its second positive mark since the beginning of the pandemic, according to The American Institute of Architects (AIA).

In March 2021, the Architecture Billings Index (ABI) logged its second positive mark since the beginning of the pandemic, according to The American Institute of Architects (AIA).

AIA’s ABI score for March rose to 55.6 compared to 53.3 in February (any score above 50 indicates an increase in billings). Scores for both new projects inquiries and new design contracts strengthened to 66.9 and 55.7 respectively. March also marked the first time in three years all building sectors and regions posted positive scores.

“As business activity at architecture firms moves sharply toward recovery, it is very encouraging to simultaneously see such positive indicators of future project work increasing in the pipeline,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “The activity architecture firms are seeing is a positive bellwether not only for the construction outlook, but also for the larger economy.”

Key ABI highlights for March include:

  • Regional averages: Midwest (56.5); South (55.8); West (52.8); Northeast (50.8)
  • Sector index breakdown: commercial/industrial (57.0); mixed practice (54.9); institutional (54.4); multi-family residential (52.6)
  • Project inquiries index: 66.9
  • Design contracts index: 55.7

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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Architecture Billings Climb into Positive Territory

Continuing the positive momentum of a nearly three-point bump in January, the Architecture Billings Index (ABI) reached its first positive mark since February 2020, according to The American Institute of Architects (AIA).

Continuing the positive momentum of a nearly three-point bump in January, the Architecture Billings Index (ABI) reached its first positive mark since February 2020, according to The American Institute of Architects (AIA).

AIA’s ABI score for February was 53.3 compared to 44.9 in January (any score above 50 indicates an increase in billings). February also marked the first time the design contract score rose back into positive territory since the pandemic began with a score of 51.6 compared to 48.8 in January. The new project inquiries score for February reached a 22-month high water mark with a score of 61.2 compared to 56.8 in January.

“Hopefully, this is the start of a more sustained recovery. It is possible that scores will continue to bounce above and below 50 for the next few months, as recoveries often move in fits and starts,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Beyond the encouraging billing data, architecture employment added 700 new positions in January and has now regained 45 percent of the jobs that were lost since the beginning of the pandemic.”

Key ABI highlights for February include:

Regional averages: South (52.4); West (49.5); Midwest (49.3); Northeast (46.9)
Sector index breakdown: mixed practice (52.5); commercial/industrial (50.5); multi-family residential (48.3); institutional (47.8)
Project inquiries index: 61.2
Design contracts index: 51.6

(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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Total Construction Starts Down to Begin 2021, But Nonresidential Stable

Total construction starts dropped 4% in January to a seasonally adjusted annual rate of $794.3 billion. Nonresidential building starts were flat in January, while nonbuilding starts dropped 10% and residential starts were 4% lower. From a regional perspective, starts were lower in three of the five regions – the Midwest, South Atlantic, and South Central. Starts rose, however, in the Northeast and West.

Total construction starts dropped 4% in January to a seasonally adjusted annual rate of $794.3 billion. Nonresidential building starts were flat in January, while nonbuilding starts dropped 10% and residential starts were 4% lower. From a regional perspective, starts were lower in three of the five regions – the Midwest, South Atlantic, and South Central. Starts rose, however, in the Northeast and West.

With only one month of 2021 completed, a year-to-date analysis will provide little useful information. Additionally, January 2020 (i.e. pre-pandemic) was the culmination of a strong cyclical upswing in construction starts that began in 2010 and thus provides a poor point of comparison. An alternative viewpoint for analysis is comparing 12-month totals. For the 12 months ending January 2021 total construction starts were 11% below the 12 months ending January 2020. Nonresidential starts were down 25%, while nonbuilding starts dropped 15%. Residential starts, however, were 5% higher for the 12 months ending January 2021. In January, the Dodge Index lost 4% to 168 (2000=100) from the 175 reading in December.

“The tenuous beginning to construction starts in 2021 highlights the long and rocky road ahead for the sector this year”, stated Richard Branch, Chief Economist for Dodge Data & Analytics. “Over the course of the year the economy will recover as more Americans receive their vaccinations. However, the construction sector’s recovery will take time to materialize due to the deep scars caused to the industry by the pandemic. Patience will be key in the months to come.”

Nonbuilding construction started 2021 with a resounding 10% decline in January to a seasonally adjusted annual rate of $168.4 billion. Every nonbuilding sector posted a decline during the month — environmental public works fell 6%, highways and bridges dropped 7%, while starts in the utility/gas plant category lost 13%, and miscellaneous nonbuilding starts plunged 17%.

For the 12 months ending January 2021, total nonbuilding starts were 15% lower than the 12 months ending January 2020. On a 12-month sum basis, street and bridge starts were 5% higher, but environmental public works starts were 3% lower, miscellaneous nonbuilding starts dropped 28%, and utility/gas plant starts lost 40%.

Nonresidential building starts were unchanged in January at a seasonally adjusted annual rate of $224.5 billion. Commercial starts were 1% higher during the month as a sizeable gain in warehouse construction offset declines elsewhere. Institutional building starts fell 9% in January, with education and healthcare construction down sharply. Manufacturing starts, meanwhile, rose 81% due to the start of two large projects.

For the 12 months ending January 2021, nonresidential building starts tumbled 25% relative to the 12 months ending January 2020. Commercial starts dropped 27%, institutional starts were 15% lower, while manufacturing starts collapsed 59%

Residential building starts fell 4% in January to a seasonally adjusted annual rate of $401.4 billion. Multifamily housing starts were 7% lower, while single family dropped 3%.

For the 12 months ending January 2021, total residential starts were 5% higher than the 12 months ending January 2020. Single family starts gained 12%, while multifamily starts slid 12% on a 12-month sum basis.

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Architectural Billings Continue to Contract in 2021

A slight improvement in business conditions has led to fewer architecture firms reporting declining billings, according to The American Institute of Architects (AIA).

A slight improvement in business conditions has led to fewer architecture firms reporting declining billings, according to The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for January was 44.9 compared to 42.3 in December (any score below 50 indicates a decline in firm billings). Last month’s score indicates overall revenue at U.S architecture firms continued to decline from December to January, however, the pace of decline slowed. Inquiries into new projects during January grew for the second month in a row, with a score of 56.8 compared to 51.7 in December. The value of new design contracts also reflected an easing in the pace of decline, rising to a score of 48.8 in January from 47.0 the previous month.

“The broader economy entered a soft spot during the fourth quarter of last year, and business conditions at design firms have reflected this general slowdown,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “While federal stimulus and the increasing pace of vaccinations may begin to accelerate progress in the coming months, the year has gotten off to a slow start, with architecture firms in all regions of the country and in all specializations reporting continued declines in project billings.”

Key ABI highlights for January include:

* Regional averages: South (47.4); West (42.8); Midwest (42.2); Northeast (41.9)
* Sector index breakdown: mixed practice (47.9); multi-family residential (44.4); commercial/industrial (44.3); institutional (39.9)
* Project inquiries index: 56.8
* Design contracts index: 48.8

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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