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AIA Chief Economist Kermit Baker looks into the financial headwinds and construction activity for the remainder of 2023

2023-07-27T19:27:00-04:00

The report that we just released is showing spending for the year up 20%. So, we’ve obviously seen a much stronger first half of the year than was anticipated. And that’s reflected in the current projection for 2023 as a whole. Since we’ve seen such a strong first half, the consensus is not for more acceleration in the second half. The consensus seems to be that strength is behind us and we’ll begin to moderate as we move into the second half of the year.

Baker predicts institutional construction will remain strong for the rest of this year, bolstered mainly by healthcare. Other sectors he expects to see a rebound include hospitality, K-12, and warehouses, albeit at a dampened pace for the third. He also mentions the new AIA Consensus Construction Forecast predicting a slight (1.7%) contraction in spending for 2024, along with another slight acceleration in institutional, and says both are likely to be exacerbated by the combined effects of inflation and other cost-related factors.

Explore related AEC economic news reported in June and July on Archinect below:

AIA Chief Economist Kermit Baker breaks down the industry's burgeoning renovation revolution

2022-10-26T11:58:00-04:00

It’s the first time in the 20 years the AIA has collected this data that renovations have breached 50%. In 2005, toward the end of a pre-recession building boom, renovations made up approximately one-third of billings. That share has been increasing steadily since 2017, when it was 44.4%, up to 52% this year. Kermit Baker, the AIA’s chief economist, says that the last time the market for design services was so heavily weighted toward renovations was likely during the Great Depression.

According to Baker, about 25% of renovation projects constitute interior remodels, while adaptive reuse schemes make up another quarter of those registered with the AIA. Just 3.8% are done in the interest of improved building energy performance, with a scant 1.6% being resiliency projects. The article also mentions the organization's estimate that only 10% were undertaken "as a result of the pandemic" in spite of the prevailing industry narrative.

Data centers are unsurprisingly leading the renovation charge, followed by office upgrade projects aimed at luring back remote workers ("There’s almost a perfect correlation between what sectors are the strongest and where there was the most renovation activity," according to Baker.)

"Buildings are just getting older," he explained further, pointing to demographic causes. "Our economy is growing more slowly, our popula...

Lukewarm Architecture Billings Index persists in June

2020-07-22T13:14:00-04:00

The American Institute of Architects (AIA) has published its monthly Architecture Billings Index (ABI) report for the month of June, which registers slight growth in the demand for design services relative to the previous month after a season of steep declines due to the COVID-19-pandemic.

June ABI highlights

Architecture Billings Index score for June: 40.0
Project inquiries index: 49.3
Design contracts index: 44.0

An announcement from the AIA highlighting the latest report explains that demand for design services for architecture firms "began to stabilize in June, following their peak declines in April." The figures build on slight gains seen in the month of May and represent the second consecutive month of demand growth following April's historic lows.

For reference, May's ABI report posted an overall score of 32.0, while inquiries and contract executions registered scores of 38.0 and 33.1, respectively. Though still below the 50.0 mark that signals overall growth in demand, the r...

Nonresidential construction to show modest growth for 2020, 2021

2020-01-27T16:39:00-05:00

According to a recently published economic report from the American Institute of Architects (AIA), the nation's nonresidential construction sector is expected to see growth of "just 1.5 percent through 2020," with a "less than a one percent increase" projected for 2021.

The report does little to either worsen or assuage long-running fears that a recession may take hold sometime during 2020, and instead offers anemic growth projections for the coming two years.

The Forecast

The prognostication comes from the so-called Consensus Construction Forecast created by AIA that combines economic forecasts for different market sectors from a panel made up of leading market entities, including Moody's, Wells Fargo, and Dodge Data & Analytics.

For the coming year, the consensus forecast envisions relatively strong growth for the education (3.9%), office (3.0%) and institutional (2.9%) segments, with the strongest growth coming from so-called "public safety" projects, which are projected to grow...

Architecture Billings Index ends 2019 on a high note

2020-01-22T14:00:00-05:00

After a somewhat bumpy spring and summer, the Architecture Billings Index (ABI) closed out the year on a positive note with three consecutive months of modest growth.

A strong winter

Architecture Billings Index Score for December: 52.5
Project inquiries index: 58.7
Design contracts index: 53.4

A new report from the American Institute of Architects (AIA) highlights that the ABI registered a score of 52.5 for the month of December, up from 51.9 in November and 52.0 in October. According to how the index is tabulated, any score above 50.0 indicates an increase in the demand for design services, while a score below 50 indicates a decline in demand. The three-month growth spurt follows contractions that took place over the summer, when the ABI scored 49.7 in September and 47.2 in August.

December's positive score was fueled by growth in both new project inquiries and design contract executions, which surged to show scores of 58.7 and 53.4, respectively. It appears that the mid-year slump w...

November Architecture Billings Index shows modest growth

2019-12-18T13:49:00-05:00

The Architecture Billings Index (ABI) registered positive growth for American architecture firms during the month of November 2019.

According to a newly published report from the American Institute of Architects (AIA), the ABI scored at 51.9 last month, signaling the second month of modest growth for the industry following a somewhat depressed summer. According to the diffusion index, which measures work-on-the-boards at various architecture firms via a voluntary survey, billings, design contract executions, and new work inquiries were all up in November.

The country's four economic regions showed mixed growth with the Northeast shrinking significantly in terms of billings activity last month. Image courtesy of The American Institu...