Tag archives for | Kermit Baker

Tag archives for: Kermit Baker

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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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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Nonresidential Construction to Grow by 3 Percent in 2011

AIA’s Consensus Construction Forecast predicts a 20 percent-plus decline in nonresidential construction spending through 2010.

According to the semi-annual Consensus Construction Forecast recently released by the American Institute of Architects (AIA), the poor conditions created by a combination of surplus nonresidential facilities, low demand for space, declining commercial property values, and lack of available credit are laying the groundwork for drop of more than 20 percent in nonresidential construction spending this year, despite slight improvements in the overall economy.

However, conditions should begin to turn around by the middle of 2011, with an overall increase of 3.1 percent, notes AIA chief economist Kermit Baker, Ph.D., Hon. AIA. The hotel, amusement/recreation, and retail sectors will lead with 8.7 percent, 8.1 percent, and 7.6 percent growth, respectively. Healthcare facilities will follow closely with growth at 5.1 percent, but all other sectors—office buildings, industrial, education, religious, and public safety—will see far less positive improvements; only education is predicted to top 1 percent in growth in 2011.

To read the complete Consensus Construction Forecast and Baker’s analysis, click here.

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Slump in Demand for U.S. Architects May Be Near End

Our company began to experienc a slight uptick in hiring during May to present.  This article by Prashant Gopal in Bloomberg Business seems to confirm what we are reporting:

May 19 (Bloomberg) — A leading indicator for U.S. commercial property construction showed signs of improvement in April, indicating a rebound in building may be near, the American Institute of Architects said.

The Architecture Billings Index climbed to 48.5 from 46.1 in March, the third straight monthly increase, the Washington- based group said today. While any score of less than 50 indicates a drop in demand from the previous month, April’s decline was the smallest since January 2008.

“It appears that the design and construction industry may be nearing an actual recovery phase,” Kermit Baker, the group’s chief economist, said in a statement. “The economic landscape is improving.”

The index is an indicator of future building of offices, warehouses, apartments and retail properties. There is typically a lag of about nine to 12 months between the time architects bill clients and when developers start spending on construction, according to the AIA.

Overall construction spending in the U.S. increased 0.2 percent in March, fueled by federal stimulus spending on power plants, hospitals and transportation projects, the Commerce Department said May 3. Private construction spending for non- residential projects fell 0.7 percent in March from the previous month and 26 percent from a year earlier.

Commercial Property Values

The Moody’s/REAL Commercial Property Price Index fell 0.5 percent from February, the second straight monthly decline, Moody’s said today in a report. Prices slid 25 percent from a year earlier and are down 42 percent from the peak reached in October 2007.

RNL, a Denver-based company that provides architectural work for mixed-use projects in the western U.S. and overseas, has added five employees over the past three months. It trimmed its workforce to about 150 from 250 during the past two years, said Richard von Luhrte, the firm’s president.

Foreign investors, public-private partnerships and landlords seeking to renovate distressed properties are driving von Luhrte’s business, he said in an interview.

“We’ve seen the bottom and we’re stable,” he said. “Obviously the last year has been challenging, but there are some opportunities out there.”

The Northeast was the strongest of the four regions measured by the American Institute of Architects index, registering 51 and showing growth in demand for commercial architects. It was followed by the Midwest at 49.2, the South at 46.5, and the West at 44.7.

The Architecture Billings Index is based on a survey of firms owned by AIA members. Participants are asked each month whether their billings increased, decreased or stayed the same.

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Work-on-the-Boards: Business Conditions at Architecture Firms Largely Unchanged in May

Architects see stimulus program projects generally promoting emerging design trends


by Kermit Baker, PhD, Hon. AIA
AIA Chief Economist

Summary: The path toward recovery in design activity has stalled recently. After a significant moderation in the downturn in design billings in March, the AIA’s Architecture Billings Index (ABI) has failed to show any further hopeful signs in April or May. The ABI score from May was 42.9, barely moving the needle from the 42.8 score in April. Since any score below 50 reflects an overall decline in billings, the May reading indicates that business conditions at architecture firms are still deteriorating, and that there was no significant movement toward recovery during the month.

Full article via AIAarchitect Blog

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