Index Of Nonresidential Construction Activity Rises
The Architecture Billings Index (ABI), a leading economic indicator of nonresidential construction activity, was positive again in April.
The Architecture Billings Index (ABI), a leading economic indicator of nonresidential construction activity, was positive again in April.
The ABI has been positive for nineteen consecutive months and twenty-eight out of the last twenty-nine months. The American Institute of Architects (AIA) reported the April ABI rating was 54.2 (any score above 50 indicates an increase), up significantly from the 50.5 mark in March.
“The protracted period of positive billings at architecture firms is more positive news for the nonresidential construction industry that should amount to sustained activity well into 2007,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The increasing costs and decreasing availability of building materials continues to be a difficult issue, however, and was noted as a problem by more than seventy percent of surveyed architecture firms.”
From an investment perspective Global Real Analytics LLC reported that commercial real estate total returns outpaced the stock market by over fifty percent during the past decade, and an index created by economists at the Massachusetts Institute of Technology showed that total returns on U.S. commercial real-estate investments reached thirty-four percent in 2005. Based on the approximately six to nine month lag time between architecture billings and construction spending, the ABI can be a helpful tool for those who invest in the commercial real estate market.
- Regional averages: Northeast (53.9), South (52.8), West (52.8), Midwest (50.4)
- Sector index breakdown: commercial / industrial (57.1), mixed (51.2), institutional (50.3
- Billings inquiries index: 62.0, up from the 59.4 score in March
AMG National Trust Bank Chief Economist Michael Bergmann says, “The latest news on architecture billings provides an important confirmation that the strong first quarter figures for business investment in structures, up an annualized 8.6 percent,w as not just a one-time spurt. No doubt some of the first quarter pickup was due to a bounce back from the weather-related difficulties that prevailed from the Gulf Coast to the northeast during the latter part of 2005. That is clearly not the whole story, however. Declines in industrial and office vacancies were significant over the past year. As the ABI illustrates, the need for additional capacity has businesses’ planning for new construction, even as needed repairs to storm-related damage assumes less importance. Nonresidential construction should remain robust through the remainder of the year with annual growth rates ranging from 8 to 11 percent in the next three quarters.”
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