Industry Outlook

Design Services Demand Stalled in June

Demand for design services at architecture firms decreased in June in comparison to the previous month, according to a report from the American Institute of Architects (AIA).

AlA’s Architecture Billings Index (ABI) score for June was 49.1, which is down from 50.2 in May. Any score below 50 indicates a decrease in billings. Both the project inquiries index and the design contracts index continued to soften in June but remained positive.

“With billings declining or flat for the last five months, it appears that we are settling in for a period of soft demand for design services,” says AIA chief economist Kermit Baker. “With the new design contracts score reaching a ten-month low and the project inquiries score hitting a ten-year low, work in the pipeline may start to get worked off, despite current robust backlogs.”

Dodge Momentum Index Increases in June

The Dodge Momentum Index moved 4% higher in June to 146.1 (the year 2000 = 100) from the revised May reading of 140.5. The momentum index, issued by Dodge Data and Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning. The June increase for the index reflected a 6.1% jump by its institutional component and a 2.4% gain by its commercial component.

Despite the improvement shown by the momentum index in June, planning for commercial and institutional building projects has stepped back from the torrid pace set during the first half of 2018. The average of the overall momentum index through the first six months of 2019 was 4.3% lower than the same period a year ago, with the commercial component down 5.2% and the institutional component down 3%. What June’s improvement does affirm is that the broader pullback by the momentum index remains gradual, and that there are still ample projects at the planning stage to maintain stability for construction spending in the near term, according to the company.

June Construction Starts Climb 9 Percent

New construction starts in June advanced 9% from the previous month to a seasonally adjusted annual rate of $832.7 billion, according to Dodge Data & Analytics. The increase followed the 10% gain reported for May, as total construction starts continued to strengthen following April’s subdued performance.

By major sector, much of the lift in June came from a 16% jump for nonresidential building, which reflected the start of the $1.1 billion expansion to Terminal 5 at Chicago‘s O‘Hare International Airport, as well as sharp gains for office buildings, public buildings, healthcare facilities and warehouses.

Through the first six months of 2019, total construction starts on an unadjusted basis were $378.8 billion, down 8% from the same period a year ago. On a 12-month moving total basis, total construction starts for the 12 months ending June 2019 were 4% below the amount for the 12 months ending June 2018.

“The improved activity during May and June suggests that the gap relative to last year should narrow in coming months,” says Robert A. Murray, chief economist for Dodge Data & Analytics.

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