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Architecture Billings Index rises in August

The American Institute of Architects Latest from The Business Journals Architecture index back in black, reverse surprises economistArchitecture index back in black, reverse surprises economist Ripken bringing his baseball ‘Experience’ to local youth Follow this company ’ Architecture Billings Index rose in August after four straight monthly declines.

The national index was 51.4 in August, following a very weak score of 45.1 in July. Any number above 50 indicates an increase in billings. The new projects inquiry index, which represents the number of inquiries from clients about new projects, was 56.9, a sharp increase over the 53.7 posted in July.

“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said the AIA’s chief economist, Kermit Baker, in a news release. “Many firms are still struggling and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.”

The regional billings indexes for August were 49.0 in the Midwest, 47.4 in the South, 47.4 in the West and 46.5 in the Northeast.

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US architects salaries stagnant, AIA survey finds

Latest US billings index and employment figures also gloomy

US architects’ pay is “stagnant,” according to a new American Institute of Architects (AIA) survey.

The average salary for senior design or project management staff is $94,900 (£58,773), compared with $98,800 in 2008 and $85,800 in 2005.

The average salary for architects/designers is $71,600, unchanged from three years ago but up from $57,700 in 2005, the survey found.

AIA chief economist Kermit Baker said: “In addition to reducing benefits offered to employees, architecture firms have been faced with devastating conditions and had to make difficult reductions in expenses. Salary freezes or reductions, scaled-back hours, the conversion of full-time to part-time or contract employees and mandatory furloughs have all taken a toll on the compensation of architects.”

The AIA noted that the architecture profession had been “hit especially hard” as the construction industry continued to suffer the effects of the prolonged economic downturn.

The survey comes on the back of disappointing employment figures in the States. The construction industry added 24,000 jobs nationally in the first three months of the year – the first quarterly gain since 2006 – before returning to contraction by losing 9,000 jobs overall in the second quarter.

Meanwhile, the latest architecture billings index showed a fall for the third month in a row, reversing nearly all of the improvement generated during late 2010 and spring 2011 when there were five straight months of positive conditions.

Source: BD Online.co.uk

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Recession, Stage II

While the economy has stabilized in some regards, architects are still suffering.

Just when it seemed that the architecture industry might be pulling out of its tailspin, some key economic indicators are suggesting that a recovery might take longer than expected.

The Architecture Billings Index, a measure of the industry’s health compiled by the American Institute of Architects, has dipped below 50 for three consecutive months, posting scores of 47.6 (April), 47.2 (May), and 46.3 (June). Those dips came after five straight months of the ABI hovering at or above 50, a sign of increased activity.

Moreover, Engineering News-Record’s Construction Industry Confidence Index—based on surveys sent to contractors, subcontractors, engineers and architects—fell five points in the second quarter of 2011, from 51 to 46.

That data doesn’t surprise architect Charles Dalluge of the Omaha-based firm Leo A. Daly, which has 31 offices around the world. Even though some architects were publicly predicting that “it would be heaven in 2011,” he says, a lot of firms are still suffering.

And he might know. In June, his firm laid off 50 employees from various offices, including architects and engineers. Dalluge defends the move as part of a “strategic repositioning” that will result in the hiring of 50 workers with specialties in areas of growth, such as healthcare. The firm now has 900 employees. 

But even a healthcare focus may not be enough to keep some firms alive. In June, Karlsberger, a Columbus, Ohio-based healthcare-focused firm, closed after 83 years in business. None of the firm’s managers would comment on the shuttering, which is believed to have resulted in 40 job cuts. A statement on its website, however, blamed the state of the market for its woes. “Our level of revenues are insufficient for us to meet our ongoing obligations,” it says.
Karlsberger’s former president, Mitchel Levitt, who resigned in April 2010 after 31 years, told RECORD that the firm lost a major lawsuit that made it difficult to go on. The suit was brought against Ohio State University, one of Karlsberger’s largest clients, over the school’s termination of a contract for a $1 billion medical center expansion; the lawsuit was dismissed in December. “It probably hurt them,” Levitt said in an interview conducted in June. “But I thought they had done what they needed to do to continue to operate.”

While the new office building market may show few signs of turnaround, especially while jobs are scarce, a bright spot appears to be college work. Many schools’ endowments were wiped out in the recession but are now being replenished by a robust stock market, which means that many stalled university projects are back on track.

Indeed, the economic downturn suspended a renovation of Yale’s 1928 Swartwout Building, designed by Egerton Swartout. But that project recently resumed, says Richard Olcott, partner at New York-based Ennead Architects, which is overseeing the renovation. Olcott adds that his firm didn’t lay off any workers during the recession; in fact, it hired 40 people in the last year, including architects, for a grand total of 160 employees.

Even public universities, once hurt by dwindling tax-collection revenues, are restarting projects, according to Ayers Saint Gross, a Baltimore design firm at work on a once-stalled science building for the University of Delaware.

The firm added 18 people last year and is now looking to hire five more, including architects. It now has 130 employees, its highest-ever headcount, said Adam Gross, a principal. “I think the indicators are pretty serious,” he said, referring to the ABI and other worrisome data, “but not as serious as we experienced” in the fall of 2008.

Source Architectural Record

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UPDATE 1-US architecture billings index falls in June-AIA

* June ABI 46.3 vs. May 47.2

* Project inquiries index rises to 58.1

* Institutional sector weakest amid tight govt. budgets

* Analyst: Construction recovery in 2012 or later (Adds analyst comment)

NEW YORK, July 20 (Reuters) – A leading indicator of U.S. non-residential construction activity fell for the third consecutive month in June, suggesting an anticipated construction recovery was still several months away.

The Architecture Billings Index fell 0.9 point to 46.3 points in June, according the American Institute of Architects (AIA). Any reading below 50 indicates contraction in demand for architects’ services, whose revenue predicts construction activity nine to 12 months in the future.

A separate index of project inquiries rose, however, to 58.1 from 52.6 in May. This measure is typically higher as multiple architecture firms compete for the same work.

“While a modest turnaround appeared to be on the way earlier in the year, the overall concern about both domestic and global economies is seeping into design and construction industry and adding yet another element that is preventing recovery,” AIA chief economist Kermit Baker said.

Demand is weakest in the institutional sector that includes government buildings, reflecting depressed government budgets, according to the monthly survey of architecture firms.

“The threat of the federal government failing to resolve the debt ceiling issue is leading to higher borrowing rates for real estate projects,” Baker said. “Should there actually be a default, we are likely looking at a catastrophic situation for a sector that accounts for more than 10 percent of overall GDP.”

Commercial property values fell to new lows in April and office vacancy rates are well above pre-recession lows, JPMorgan analyst Ann Duignan said in a note to clients.

“The recovery has yet to find solid ground and that the non-residential construction environment remains challenging,” she said. “We believe it is more likely that non-residential construction will not recover until 2012+.”

A depressed construction market has been a headwind for manufacturers of construction machinery and components that make up buildings’ infrastructure, such as electrical, cooling and security systems.

Most diversified industrial companies get at least some revenue from the non-residential construction sector, which includes office buildings, retail and warehouse space, and institutional buildings such as schools and hospitals.

Companies exposed to the sector include Honeywell International Inc (HON.N), Tyco International Ltd (TYC.N), Ingersoll Rand (IR.N), Johnson Controls (JCI.N), Eaton Corp (ETN.N), Caterpillar Inc (CAT.N), Deere & Co (DE.N) and Terex Corp (TEX.N).

European companies such as Siemens AG (SIEGn.DE), Schneider Electric SA (SCHN.PA) and lock maker Assa Abloy (ASSAb.ST) are also big players in the sector. (Reporting by Nick Zieminski, editing by Maureen Bavdek and Derek Caney)

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Manhattan office leasing volume hits 13-year highs

Activity in first half of year soars 40% over 2010 level and in May and June sets a new record; in good news for tenants, rent increases are still seen as modest.

Leasing activity in Manhattan in the first half of the year totaled 17.6 million square feet, the best six-month performance in 13 years and a 40% surge from the corresponding period of 2010, according to Cushman & Wakefield Inc. Meanwhile, activity in the last two months of the quarter was the strongest on record.

In yet another bullish sign, absorption—which measures the net change of occupied space in a given time—was a positive 3.2 million square feet. That marked the first time that measure has been positive for the first six months of the year since 2007.

“Leasing activity has been pretty impressive,” said Joseph Harbert, Cushman & Wakefield’s chief operating officer for he New York metro region.

All that activity helped shrink the overall average vacancy rate to 9.4% by the end of last month from 10.8% in the same period last year.

The surprising news for landlords—and the good news for tenants–was that despite the surge in deal volumes, the overall asking rents grew a mere 2% to an average of $55.52 a square foot.

“Increases are modest compared to the activity,” said Mr. Harbert. “This is still a relatively good [leasing] opportunity for tenants.”

Brokers at Cushman’s quarterly press briefing suggested several reasons for the disparity. One noted that the 9.4% vacancy rate still favors tenants and that once it hits 8%, which is widely considered a point where there is negotiating equilibrium between landlords and tenants, rents should shoot higher.

Another suggested some landlords were keeping quality space off the market, waiting for the market to further improve so they could fetch even richer numbers. Yet, a third suggested that the economy was still shaky enough where landlords didn’t want to quibble over price, especially not with credit-worthy tenants looking to lease significant blocks of space.

Some sub-markets in Manhattan are already seeing major increases. Mr. Harbert said rents in the Plaza District, the tony enclave favored by hedge funds and financial firms, were growing at twice the pace of the average, up 20% from the market trough.

Rents in the downtown market advanced more than in the other two business districts–midtown and midtown south. They jumped 4.2% to $39.38 a square foot. The market got a big boost from Condé Nast signing a 1 million square foot deal at 1 World Trade Center.

Source: Crain’s New York Business

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New York City’s ‘design sector’ grew 75% the past decade

Study ties 40,000-plus jobs here to creative services like fashion, architecture, and interior, industrial and graphic design. City could do more to stoke NY’s creative juices, study argues.

New York’s design sector is the unsung hero of the city’s economy, growing by 75% in the past decade to supply more than 40,000 jobs, an economic think tank reported Wednesday.

More designers are employed here than in any other U.S. city, thanks in part to an explosion in recent years of Brooklyn-based companies, said the report, released on Wednesday by The Center for an Urban Future, a think tank in Manhattan. It noted that the number of Brooklyn-based firms spiked from 257 in 2001 to 433 in 2009, for a 70% increase.

But the massive potential of New York’s design industries isn’t sufficiently exploited by local economic development interests, the report said, arguing that city and state governments don’t do enough to promote local designers and their work.

In other cities around the world, the government invests cash and energy in promoting their design industries, said David Giles, the study’s author. “Milan brands their furniture designers, London brands their industrial and graphic designers,” he explained. “And in the U.K., the Trade and Investment agency is a venue for foreign investors to meet manufacturers.”

Similarly, he said, other cities promote aggressive export strategies, while New York does not; for example, while New York’s state export assistance program has a budget of $1.5 million dollars a year, the province of Ontario has $70 million to work with annually. “There’s huge potential here,” Mr. Giles said.

Designers in New York echoed the study’s conclusions. Amy Smilovic, the head designer for the young contemporary design house Tibi, has noticed the differences in her travels. “When you go to Milan or Paris, or even Miami,” she said, “you get the sense that design is part of the heritage and that it’s very respected and promoted. New Yorkers are hard pressed to even know when fashion week is.”

Sometimes, it’s the little things that can convey that impression.

“In Paris, when you go to even the fabric shows, the trade center is so accessible by train and all the Metro platforms have signage up everywhere so everyone in Paris knows the shows are happening.” Ms. Smilovic said. “New Yorkers are hard-pressed to even know when fashion week is.”

But Brooklyn native Paul D’Aponte, whose company Fabbrica D’Aponte designs apparel, accessories and furniture, said that while the city doesn’t seem too concerned with marketing design, he can’t really blame public officials.

“When they’re having these massive problems with the education system, for example, that takes precedence,” Mr. D’Aponte said.

“I wouldn’t mind help with my business, but I’d be better off if I had had a better K-12 education to begin with,” he joked.

The city’s Economic Development Corp. said Wednesday it would review the report’s recommendations. “Over the past two years we’ve launched a number of programs dedicated to helping our thriving creative industries,” said a spokesman for the EDC. “But we’re of course always looking for new ideas.”

On Wednesday, the EDC announced the implementation of “Fashion Campus NYC,” an initiative designed to give exposure to up-and-comers in fashion and retail management. It is the first in a series of six initiatives the EDC has planned to promote the city’s fashion industry.

The study by Mr. Giles defined the city’s “creative economy” as a work force of around 40,500 in the fields of fashion design but also architecture, interior design and graphic and industrial design.

Hat tip:  Crain’s New York Business

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The Economy Is Wavering. Does Washington Notice?

The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday. Another report showed that economic growth at the start of the year was no faster than the Commerce Department initially reported — “a real surprise,” said Ian Shepherdson of High Frequency Economics.

Tony Dejak/Associated Press A job fair on Wednesday in Painesville, Ohio. Rising jobless claims are one of several recent signs of a sluggish economy.

Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent.

An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

Article continues at The New York Times

Related:  Investers Business Daily Editorial: Will ‘Obamalaise’ Create Another Downturn?

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Demand for architectural design drops in April

Demand for architectural design fell in April to the lowest point of the year.

The Architecture Billings Index, which indicates construction volume, decreased marginally to 47.6 in April from 50.5 in March, according to American Institute of Architects data released Wednesday.

The benchmark for the index is 50. Anything above that indicates an increase in architectural billings and anything below indicates a decrease. The AIA surveys a panel of member firms monthly, asking if billings increased, decreased, or stayed the same. The national association then weighs the responses for the index.

April was the first month in 2011 the index swung below 50.

The sharp decline in demand for architectural services has analysts scratching their heads. Kermit Baker, chief economist at AIA, said he is unsure whether to attribute the drop to an industry-wide reversal in demand for design or a bump in the road.

“The fact that most construction projects funded under the federal stimulus program have completed their design work, the anxiety around the possibility of a shutdown in the federal government in April, as well as the unusually severe weather in the Southeast had something to do with this falloff,” Baker said. “However, the majority of firms are reporting at least one stalled project in-house because of the continued difficulty in obtaining financing.”

Baker also echoed Redwood Trust  CEO Martin Hughes’ sentiment when he said financing continues to be the main roadblock to recovery. Hughes testified before the Senate Banking Committee Wednesday.

The new projects inquiry index also experienced a sharp drop in April, falling to 55 from 58.7 a month prior, according to AIA.

The regional buildings index was highest in the Northeast at 51.2, followed by the Midwest at 51.1, the South at 48.3, and the West at 47.7. The index was the highest in the multifamily residential sector (53.9) followed by the commercial/industrial sector (49.9), the institutional sector (45.9) and the mixed practice sector (45.2).

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Don’t string me along, U.S. temp workers say

Don’t string me along says architecture temp Althea Norwood Roberts

* Quarter of jobs created in past year were temporary
* Temps about 2 percent of overall employment
* Companies still cautious about permanent hiring

By Kristina Cooke

NEW YORK, Feb 22 (Reuters) – Althea Norwood Roberts gives employers three months to turn her temporary job into a permanent one. Then she looks elsewhere.

That’s as long as a company needs to see if she’s a good fit, the 35-year old single mother from California believes.
Norwood Roberts, currently temping for an architecture firm, is like millions of other Americans who are wondering if she will get permanent work.

“Temping is kind of like dating. It’s a trial-run for the company,” she said. “If they can’t make up their mind about you after 90 days, it’s probably not going to happen, they’re stringing you along.”

Norwood Roberts, who has a five-year old daughter, wants a job with security, good benefits and a pension. “It is not optional at this point. It is a necessity,” she said.

In the past year, about a quarter of all jobs created in the United States were temporary as companies remained cautious about the outlook for the economic recovery.

Over the past three recessions, temps — who are easier to hire and fire — have suffered the quickest and most severe cuts to their numbers at the beginning of a downturn, and then led broader employment gains when the economy recovered. For a graphic see http://r.reuters.com/geb97r

The pace of temporary job creation after the most recent recession — an average of about 25,000 per month — has been faster than in the past two, potentially a good sign for a labor market struggling with a jobless rate of 9 percent.

In the 17 months after the 2001 recession — the same period which has lapsed since the one in 2007-09 — employers added just 1,400 temporary jobs a month and the lag between the pick-up in temp hiring and the economy starting to add full-time jobs was 10 months longer.

But the faster pace of temporary hiring this time around hasn’t yet translated into significant full-time job creation.

“It will be a really good sign when we see those temporary jobs turn into permanent jobs,” Federal Reserve Chairman Ben Bernanke said this month.

Peter Capelli, a professor at the University of Pennsylvania’s Wharton School, says the jury is still out on whether the U.S. labor market is undergoing a structural change towards more temp workers or whether companies are just biding their time until demand for their products picks up and they add more long-term employees.

“It’s probably a bit of both. Another thing may be that employers are using temp work as a more thorough interview process, so it could be masking permanent hiring,” he said.

That is a trend that Randstad, the world’s second-biggest staffing firm, is seeing.

Randstad said more of its clients than in prior recoveries are using a “temp to perm” approach to hiring, to try the employee out before committing to taking them on.


Some companies are actively shifting to what they say is a more flexible workforce.

In January, Lowe’s, the home improvement giant, slashed 1,700 middle-management jobs and said it would add thousands of part-time customer service employees.

One of the middle managers laid off was Dean Lutz, 43, from South Carolina. Lutz says the job market is the worst he has seen in his career, with most available jobs either seasonal or part-time.

“Honestly, jobs available out there aren’t very good.” he said. Companies “don’t want to pay benefits or higher wages.”

Lowe’s move is “emblematic of an evolution that took place starting in the late 1970s in which employers showed less commitment to their workers,” said Gary Burtless, a professor at the Brookings Institution.

But he said there is little evidence to suggest that temporary hiring has become more common in the past couple of years, with temporary workers as a share of overall employment peaking at 2.4 percent at the height of the dotcom bubble.

Despite the faster pick-up, the number of temporary jobs is still down about 15 percent from before the recession.

Tom Bonds, vice president of operations at the Huron Valley Steel Company in Anniston, Alabama, said he expects a shift back to permanent workers once there is more clarity about the economic and regulatory outlook.

“We prefer full-time workers, because they are going to be there … with temps there is no loyalty both ways,” he said.

While temporary workers may be high caliber at times of high unemployment, the cream of the crop may be quickly snapped up once the recovery picks up steam.

Norwood Roberts, the single mother in California, is optimistic. She has had two previous temporary jobs in the past 10 years, both of which turned into permanent positions.

“I have been able to juggle things so far. Some people don’t have that luxury,” she said. “I am one of the lucky ones.”

(additional reporting by Nick Zieminski, Dan Burns and Dhanya Skariachan)


(c) Copyright Thomson Reuters 2011. Click For Restrictions. http://about.reuters.com/fulllegal.asp

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U.S. architecture billings index falls in January

* January ABI 50.0, down 3.9 pts

* New projects index falls 5 pts to 56.5

* Cautious optimism for design industry: AIA

NEW YORK, Feb 23 (Reuters) – A leading indicator of U.S. nonresidential construction activity weakened last month after two months of improving numbers, an architects’ trade group said on Wednesday.

The monthly Architecture Billings Index fell almost 4 points in January to 50.0, a level that indicates neither expansion nor contraction of demand for design services, the American Institute of Architects said.

The billings index is considered a predictor of construction spending about nine to 12 months in the future, since buildings are designed long before they are erected. The latest readings suggest an anticipated recovery in U.S. nonresidential construction may not gain traction this year.

A separate index of inquiries for new projects fell more than five points to 56.5, according to the AIA.

“This slowdown is indicative of what is likely to be a very gradual improvement in business conditions at architecture firms for the better part of this year,” said AIA chief economist Kermit Baker. “We’ve been taking a cautiously optimistic approach for the last several months and there is no reason at this point to change that outlook.”

The AIA’s billings index dropped below 50 in January 2008, indicating falling demand, and stayed below that mark until last November. The separate inquiries index only fell below 50 briefly in 2008. It is typically higher than the billings index, as prospective customers solicit bids from multiple architecture firms.

Most diversified industrial companies get at least some revenue from nonresidential construction, selling machinery used for erecting buildings or components such as elevators or electrical and cooling systems.

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