The latest data released by The American Institute of Architects (AIA) indicates that demand for design services remains low, with January marking the beginning of a third consecutive year of negative conditions for architecture and design services. The AIA's January Architecture Billings Index (ABI) dropped three points to a rating of 42.5, down from December 2009's revised score of 45.4. A score above 50 would indicate an increase in architecture billings. The past several months have seen the ABI see-saw up and down as economic conditions fluctuate. Inquiries for new projects dropped more than seven points in January, scoring 52.5.
"We've seen this sawtooth pattern now for the last six to eight months, not moving at any great speed toward a recovery in billings," says AIA's chief economist Kermit Baker, Ph.D, Hon. AIA. "It's not as bad as it was during the depths of the downturn, but it's also not moving very quickly toward anything that indicates a turnaround in design activity." Baker attributes the continued billings slump to project delays and cancellations due to lending institutions implementing "unusually stringent equity requirements on new developments."
Some sectors are performing better than others, particularly residential, Baker notes. For two out of the past three months, residential activity—represented in the ABI by the multifamily sector—has scored above 50, indicating some increase in billings. January's ABI shows the strongest billings going to the multifamily sector with a score of 50.1, followed by commercial/industrial (44.9), institutional (43.1), and mixed practice (40.3). "Residential architecture has the most optimistic outlook of any sector," says Baker. "Scores are showing some encouraging signs in multifamily, and if our numbers reflected the full residential sector it might be even more encouraging."
The regional ABI breakdown shows a mix of slight declines and almost negligible improvements with the Midwest scoring 48.0 (up from 46.6 in December), the West edging up to 40.5 from 40.0, the Northeast sliding from 48.6 to 45.7, and the South slipping to 41.32 from 43.2 in December.
Data released recently by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development also reflects the peaks and valleys Baker notes. After a brief period of improvement in November and December 2009, residential construction is once again on the downward slope.
According to the January 2010 New Residential Construction Report, permits for privately owned housing units slipped 4.9 percent to a seasonally adjusted annual rate of 621,000, down from December 2009's revised rate of 653,000. Single-family permits inched 0.4 percent above December's rate of 505,000, rising to 507,000, while permits for units in buildings of five or more units fell 26.2 percent to 96,000.
Housing starts for January were an equally mixed bag, with overall starts of privately owned housing units rising to a seasonally adjusted annual rate of 591,000, 2.8 percent above December's revised rate of 575,000. Starts of single-family units increased 1.5 percent to a rate of 484,000. Starts of units in buildings with five or more units jumped 17.6 percent in January, marking a three-month period of consistent increases. January's housing completions, however, declined in 12.9 percent for single-family to a rate of 427,000 and 11.2 percent for units in buildings of five or more units to a rate of 215,000.