Industry Outlook

Architecture Billings Lose Ground in November

Architecture firm billing activity is contracting once again after two months of a slowing decline, according to a new report from the American Institute of Architects (AIA).

The pace of decline during November accelerated from October, posting an Architecture Billings Index (ABI) score of 46.3 from 47.5 (any score below 50 indicates a decline in firm billings). The pace of inquiries into new projects slowed, but remained positive with a score of 52.0, however the value of new design contracts dipped back into negative territory with a score 48.6.

“In previous design cycles, we typically haven’t seen a straight line back to growth after a downturn hits,” says AIA chief economist, Kermit Baker. “The path to recovery is shaping up to be bumpier than we hoped for. While there are pockets of optimism in design services demand, the overall construction landscape remains depressed.

Dodge Momentum Index Steps Lower in November

The Dodge Momentum Index fell 2.6% in November to 123.3 (the year 2000 = 100) from the revised October reading of 126.5. The institutional component of the Momentum Index fell 4.4%, while the commercial component lost 1.6%.

Since the expiration of support programs in the CARES Act, the economy has struggled to maintain traction and in its wake, planning for nonresidential building projects has slowed, according to Dodge Data & Analytics. As the next wave of COVID-19 infections quickly approaches, economic growth and job gains will ease further, according to the firm.

In November, nine projects each with a value of $100 million or more entered planning.

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.

November a Mixed Month for Construction Starts

Total construction starts fell 2% in November to a seasonally adjusted annual rate of $797.5 billion following a strong gain in October. Residential starts fell 7% during the month, while nonbuilding starts dropped 14%. Nonresidential building construction starts, however, rose 19% in November. Total construction starts fell in three regions, the South Atlantic, West and Northeast, but rose in two, the Midwest and South Central.

Nonresidential building starts moved 19% higher in November to a seasonally adjusted annual rate of $249.7 billion. The commercial sector increased 27% as two large office projects got underway. Gains were also seen in the hotel, warehouse and parking structures categories. Institutional construction starts increased 17% over the month due to gains in healthcare and education. Manufacturing starts, meanwhile, fell 29% in November.

The largest nonresidential building project to get started in November was the $1.3 billion One Madison Avenue office project in New York. Also starting was the $940 million Richard Boulevard Office Complex in Sacramento, Calif., and the $615 million Baptist Healthcare Hospital in Pensacola, Fla.

Year-to-date through the first 11 months of 2020, total nonresidential building starts were down 25%. Commercial starts were 26% lower, while institutional starts were down 15% and manufacturing starts were 63% lower.

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