September's declining ABI score

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AIA\u2019s Chief Economist\nKermit Baker, Hon. AIA, explores why and discusses what types of construction business\nremains strong, despite the declining numbers from U.S. architecture firms."]]],[1,"p",[[0,[],0,"High long-term\ninterest rates, reduced lending, an uncertain economy, and construction growth\nin areas where architects are not as involved are among the reasons "],[0,[0],1,"the\nSeptember 44.8 ABI "],[0,[],0,"score is the lowest reported since December 2020."]]],[1,"p",[[0,[],0,"The ABI score is\na leading economic indicator of construction activity, providing an\napproximately nine-to-twelve-month glimpse into the future of nonresidential\nconstruction spending activity. The score is derived from a monthly survey of\narchitecture firms that measures the change in the billings from the previous\nmonth. "]]],[1,"blockquote",[[0,[],0," \u201cI do think we we\u0027re entering a period where\nbusiness activity is going to be softer at architecture firms,\u201d said Baker, who\npoints to a decline in types of construction that rely more heavily on\narchitects. \u201c\u201cThis is not weakness that we\u0027re seeing across the board, it\u0027s\nvery much by market sector.\u201d"]]],[1,"p",[[0,[],0,"Construction\ndata shows non-residential building projects for manufacturing, distribution,\nand data centers are thriving, but most architects get very little design work\nfrom those building types. ABI reports that offices account for nearly 10% of\nbillings at architecture firms; multifamily residential projects account for\nnearly 20%, rising interest rates, stalled rents, and more workers doing their\njobs remotely have weakened demand for multifamily residential and office\nbuildings."]]],[1,"p",[[0,[],0,"\u201cThe National\nAssociation of Realtors reports office vacancy rates at 13.3% nationally.\nThat\u2019s a record high according to NAR,\u201d said Baker. \u201cProperty values in the\ncommercial market are down almost 10% over the last year, even more so on the multifamily\nside. So, some of these new construction projects that might have made sense six\nto twelve months ago may not make sense now,\u201d said Baker. \u201cWe kind of overbuilt\nthose markets and they haven\u2019t come back yet.\u201d"]]],[1,"p",[[0,[],0,"While those\nmarkets rest, projects serving the health and education industries continue to\ngrow, which Baker says balances out the market, but it is not holding up\nproject backlogs, which are also shrinking for most firms. At 6.5 months on\naverage, backlogs are down almost 10% from a recent high of 7.2 months in 2022."]]],[1,"p",[[0,[],0,"\u201cThat\u2019s not dramatic,\nbut it is moving in the wrong direction,\u201d Baker said."]]],[1,"p",[[0,[1],1,"Concerning but\nnot alarming"]]],[1,"p",[[0,[],0,"Baker says the\ndwindling ABI numbers, which have been stalled for months, are concerning but\nnot yet alarming as some areas of the construction market remain strong."],[0,[1],1," "],[0,[],0,"Still,\nthe low demand from the development community suggests the ABI numbers will not\nturn around anytime soon. "]]],[1,"p",[[0,[],0,"\u201cThe economy\u0027s\ngrowing. The general sense is maybe we can avoid a recession. I think there\u0027s\nsome healthier numbers out there.,\u201d said Baker, \u201cbut construction is now at an\ninflection point. If your radar isn\u0027t up now, it should be.\u201d"]]]]}