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04.26.2010
Turning the Corner
The worst may be over as AIA billings point toward full recovery
The AIA Billings index suggests the nation may be preparing to build again.
houze/Flickr

Architects should keep their fingers crossed, but it looks like the industry may finally have turned the corner toward recovery. According to the latest AIA Architecture Billings Index released on Wednesday, firms saw their best billings in two years last month, and the first sustained growth since last summer. While billings are still declining, they may finally be headed reliably upward toward positive territory.

“I wouldn’t put it in the great category just yet, though things are good,” AIA Chief Economist Kermit Baker said. “I’d want to see some sustained growth for that, but we’re definitely moving in the right direction.”

Billings (red) and inquiries (blue) for the past 12 months

Billings reached 46.1 in March, up from 44.8 in February and the highest reading since August 2008, when billings were 46.7. Yet even those August numbers were preceded by months of lower readings, suggesting that level of activity was somewhat anomalous. The case could then be made that last month’s billings are arguably the best performance seen since January 2008, the last time the index was above 50—it fell the next month to 43.9 and has basically yet to recover. Still, as any reading below 50 means billings are declining, architects may want to hold off on the champagne just yet.

Another sign that this could be the real thing is that not only billings and inquiries—up 6.5 points to 58.5 last month—are rising, but so, too, has every region and sector, a concerted movement that has not happened since the industry’s woes began two years ago. It appears the AIA’s predictions that the industry would be emerging from its recession by the middle of the year may be spot on.

The Midwest (red) unexpectedly broke the 50-mark last month, followed by the Northeast (blue), West (green), and South (orange).

Most impressively, the Midwestern region has broken the coveted 50 mark, reaching 50.5 in March, up from 49.4 in February and the region’s tenth straight month of gains since the Midwest hit 37.2 last May. The region has been unexpectedly strong of late, thanks to improving manufacturing and housing.

The South rebounded 3.7 points to 44.4, which still leaves it in last place, but is also a promising sign for its own recovery. The East reversed a one-month dip, reaching 47.0 in March, up from 44.1. Meanwhile, the West is continuing its comeback from being the worst of all regions last summer, when it reached an abysmal 36.4. Last month it hit 46.0, up from 43.6 in February.

Institutional work (green) is on the rise and residential architecture (brown) is doing well as mixed-use (orange) sees a rebound and commercial/industrial (purple) continues to be volatile.

Within the sectors, institutional work saw the largest gains in March, rising 2.6 points to 46.8, an especially positive sign as institutions tend to be strong patrons during downturns. This has not been the case during the recent recession because many universities, foundations, and governments were especially hard hit and unable to take advantage of cheap construction costs as they typically do. Now with their latent return to health, this could be a considerable growth sector for firms.

Mixed-use work, which has posted moderate yet consistent gains since August, continued to rise, increasing 1.7 points to 45.0 in March. Industrial/commercial work, which has seen greater volatility—it has not posted two straight months of gains since this time last year—nonetheless rose in March, to 44.7 from 43.2, a gain of 1.5 points. Meanwhile, residential work was flat at 47.3, though twice in the past six months it has risen above 50.

It may be disconcerting that none of these areas within the industry has posted sustained growth, but Baker said that is yet another sign of overall improvement. “I temper my excitement because I’m constantly talking to architecture firms, many of whom are seeing little or no work,” Baker said. “But there are others who say it’s trickling back in, and some who are on track for great years. That’s actually about what you’d expect and about where we’d want to be to set us up for a complete turnaround.”

Matt Chaban