Construction Demand Grows Again, AIA Says
Construction demand grew again in July, marking the third straight month of heavy demand, according to the Architecture Billings Index (ABI).
Construction demand grew again in July, marking the third straight month of heavy demand, according to the Architecture Billings Index (ABI).
Maintained by the American Institute of Architects (AIA), the ABI scored 60 in July. That marks the second highest mark since the survey's inception in 1995 and an increase from 59.3 in June.
The ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending, with a score above 50 indicating an increase in billings.
Inquiries for new projects was 66.2, according to AIA, an increase compared to June's rating of 62.6.
“The good news for the construction industry based around high levels of demand for architectural services is tempered somewhat by nervousness in the lending market based around the collapse of the subprime mortgage sector,” says Kermit Baker, AIA Chief Economist.
“While the credit markets for nonresidential projects will most likely return to normal, there is a sense that some construction projects may be delayed until financing anxiety is settled. We will be monitoring this situation closely over the next couple of months.”
The potential for weakening construction project demand as a result of the subprime residential mortgage fallout has been a significant concern to investors, says Franco Turrinelli, senior analyst at William Blair & Company. "July’s ABI data suggests, on the other hand, that demand remains strong and that visibility into continued construction center strength should be encouraging for investing in these segments,” Turrinelli added.
Key July ABI highlights:
Regional averages: Northeast (68.5), West (60.7), Midwest (55.9) South (57.2)
Sector index breakdown: commercial / industrial (65.2), institutional (61.0), mixed practice (58.0), residential (55.5)
The diffusion indexes contained in the full report are derived from a monthly survey sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month.
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