Industry Outlook December 2021

Architecture Billings Remains Strong

According to a new report from The American Institute of Architects (AIA), architecture firms reported increasing demand for design services in October. The ABI score for October was 54.3, which is down slightly from September’s score of 56.6, but still indicates very strong business conditions overall. Any score above 50 indicates an increase in billings from the prior month. During October, scoring for both the new project inquiries and design contracts expanded, posting scores of 62.9 and 58.0, respectively.

Dodge Momentum Index Jumps in October

The Dodge Momentum Index increased 10% in October to 181.2 (2000=100), from the revised September reading of 164.6. The Momentum Index, issued by Dodge Construction Network, is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. In October, commercial planning rose 14% and institutional
gained 3%.

The value of nonresidential building projects entering planning has staged a solid recovery this fall, lifting the Momentum Index to its highest level in nearly 14 years. The commercial sector reached its highest level since the inception of the Index. Compared to a year earlier, the Momentum Index was 47% higher in October 2021. The commercial planning component was 59% higher, and institutional was 26% higher.

The dollar value of projects in the planning stage portends a healthy rise in nonresidential building construction starts on tap for 2022, according to Dodge. However, that expectation must be balanced against rising material costs, shortages of key goods, and a lack of skilled labor.

Total Construction Starts Soar in October

Total construction starts pushed 16% higher in October to a seasonally-adjusted annual rate of $1.01 trillion, according to Dodge Construction Network. Nonresidential building starts gained 29% and nonbuilding moved 52% higher in October, while residential starts lost 8%. The month’s large gains resulted from the start of three large projects: two massive manufacturing plants and an LNG export facility. Without these projects, total construction starts would have fallen 6% in October.

Nonresidential building starts shot 29% higher in October to a seasonally-adjusted annual rate of $357.2 billion. The catalyst for the increase was a large gain in the manufacturing sector as two very large projects kicked off. If not for these projects, total nonresidential building starts would have been down 3% over the month. In October, commercial starts lost 4%, with only hotels posting a gain. Institutional starts gained 4%, with all categories rising. In the first ten months of 2021, nonresidential building starts were 11% higher. Commercial starts increased 9%, manufacturing starts were 94% higher (39% without the large projects this month), and institutional starts were up 3%.

For the 12 months ending in October 2021, nonresidential building starts were 4% higher than in the 12 months ending in October 2020. Both commercial and institutional starts were up 2%, and manufacturing starts moved 24% higher in the 12 months ending October 2021.

For the 12 months ending in October 2021, total residential starts were 20% higher than the 12 months ending in October 2020. Single family starts gained 23% and multifamily starts were up 11% on a 12-month sum basis.

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