Bracing for the Worst

The Numbers

While it lacks the dramatic symbols of Bear Stearns and Fannie Mae/Freddie Mac, the apparent architectural recession may be getting as bad as the one ravaging the financial sector at the moment, at least according to the AIA Architectural Billings Index. The overall index, which surveys the increase or decrease of billings at a panel of firms nationwide, rose slightly for June but still remained on the decline for the industry.

“These numbers are a continuation of weak conditions in the nonresidential construction sector,” AIA chief economist Kermit Baker said in a statement. “Given that inquiries for new project work have not seen much improvement, it’s likely we are several months away from a turnaround.”

In June, the index rose to 46.1, up from 43.4 in May, but only a measure of 50 or above means billings are rising; this change simply means the decline has slackened, though is still falling. The one positive note is that the index continues to rise, from a record 13-year low of 39.7 in March, though given that numbers fell two points from April to May, the gain could only be temporary. Inquiries also rose from a record low of 46.5 last month to 51.8, another positive sign, suggesting interest in new work may be returning.

Regionally, the Midwest remains the one region seeing growth, with a billings reading of 51.8, continuing a trend begun last month. In his statement, Baker called it the one bright spot in the industry. The South has seen steady one to two point growth since bottoming out in March at 45.3 points and has now reached 49.0. The West and the Northeast, however, continue to decline, with scores of 36.1 and 40.7 respectively.

On the ground here in New York, opinions remain mixed. “We’re on major alert,” Fred Bland, a principal at Beyer Blinder Belle, said. He said his firm’s work remains steady but he is beginning to see signs of concern. “You would start to see more highly competitive RFPs and a leveling off in inquiries,” Bland said. “It would be fair to say we are starting to see a little of that.”

Jon Kully, a principal and co-founder of architecture firm FLAnk, said his office actually began two new projects and is looking to hire, hoping to boost his staff of 15 by two to five employees. “It’s hard to say exactly what is happening,” he said. “Everyone is different.” He did add that he and his partner at the firm, Mick Walsdorf, are trying to gauge the market to “find the best talent for the best price.”

Kully does admit that he has been particularly fortunate, given what he has heard from friends. “It sounds pretty bad out there,” he said. “I’m knocking on wood as I say this, but we’re pretty good right now. At the same time, Mick and I, we were talking this morning, and we really think it will be Q1 of ’09 when everyone really sees this hit, when designers start to get laid off.”

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