November 3, 2010
U.S. Architect Billings Increase For The First Time Since 2008

Billings by U.S. architects, a barometer of demand in commercial real estate, rose in September for the first time in almost three years, suggesting a recovery in construction spending might be under way, a survey showed.

The Architecture Billings Index increased to 50.4 from 48.2 in August, the first gain in fees since January 2008, when the index was at 51.1, according to the Washington-based American Institute of Architects. Any reading above 50 indicates an increase in billings.

Demand for architects’ services have started to rebound after the recession, spurred by the global credit crisis, drove the index down to 33.9 in January 2009, the lowest since the institute began tracking the data in 1995. Housing starts in the U.S. also rose in September, surpassing economists’ estimates, the Commerce Department said yesterday.

“We’re moving in the right direction,” Kermit Baker, chief economist of the architects’ institute, said in a telephone interview. “It certainly looks like a sustainable recovery on the commercial and industrial side.”

Commercial construction spending typically lags behind design work by nine to 12 months, according to the institute. About 35 percent to 40 percent of the index reflects billing for office buildings, hotels, shopping centers, banks, warehouses, manufacturing plants and other commercial properties.

Fifth Straight Gain

The index for commercial and industrial billings rose to 56.3 from 54.6 in August, the fifth straight gain. The billings indexes for residential projects such as apartment buildings and condominiums, and for institutional work including schools and hospitals, remained below 50 in September, suggesting demand is still falling for those projects.

Residential accounts for about 15 percent of the overall index, and institutional for 45 percent to 50 percent, Baker said.

A separate index that measures client interest in new projects also rose, climbing to 62.3, the highest since July 2007, from 54.6 in August, the institute said.

The Architecture Billings Index is based on a survey of firms owned by members of the American Institute of Architects. Participants are asked each month whether their billings rose, fell or stayed the same in the month just ended, and their responses are used to generate the index score.

Source: Bloomberg, October 20, 2010

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