The new year continues to look like a bad one for architects, and while 2010 may not be as dire for the industry as 2009, new data released today suggests another contraction could be on the horizon. After essentially holding steady during the fourth quarter, the AIA Architecture Billings Index saw its first major drop since last June. And an even greater cause for concern is the precipitous decline in inquiries for new work, which remain positive but only marginally so.
Scott Frank, director of media relations for the AIA, said he does not expect the plight of architects to get considerably worse, suggesting that these latest moves are simply a result of continued uncertainty within the economy. “I hadn’t gotten that sense from the comments in our billings surveys,” Frank told AN. “Hopefully we’ve seen the worst, which was January 2009, but I also don’t have the sense that we’ve turned the corner. There’s nothing picking up the slack.”
Still, the latest numbers could give architects pause. January billings fell 2.9 points to 42.5 from 45.4 in December, the first negative shift of more than a point in seven months. Granted, that 4.8-point drop in June, when billings reached a low of 37.1, was followed by a 5.2 point gain in July. January’s dip could then be a similar fluctuation in an otherwise steadily mediocre climate. (A measure above 50 means billings are rising, and below 50 they are falling.)
But unlike in June, when inquiries stayed relatively steady—they took a similar one-month dip in July—January’s billings decline was matched with an even steeper fall in inquiries, a 7.2-point slide to 52.5 from 59.7. Inquiries have not fallen so quickly since October 2008, after the economy went into its tailspin following the collapse of Lehman Brothers.
In a statement, AIA Chief Economist Kermit Baker placed the blame for the January numbers on—who else?—the banks. “Projects are being delayed or cancelled because lending institutions are placing unusually stringent equity requirements on new developments,” Baker said, though this was not his only concern. “This serious situation is being compounded by a skittish bond market, decreased tax revenues for publicly financed projects, and declining property values—all which serve as deterrents for construction activity,” Baker added.
It is difficult to predict whether the billings index will return to the mid-40s—not a good place to be as it is—or continue to slide in the coming months. What can be expect, though, is that this latest shock likely means the industry is not as close to recovery as recent billings stability had led some to hope.