A leading indicator for commercial, institutional and multifamily construction fell sharply to 49.3 in November, with continued strength in the U.S. South and West regions offset by weaker scores in the Midwest and Northeast.
The Architecture Billings Index (ABI) declined nearly four points last month from the score of 53.1 recorded in October, reflecting a net decline in design services work in November, according to the American Institute of Architects (AIA), which compiles the monthly survey of construction and design firms. Any score under 50 reflects a decrease in architecture billings in the index, which leads actual construction spending by an average of 11 months.
Architecture firms continue to report new projects and business, and the monthly volatility in billings “doesn’t seem to reflect any underlying weakness in the construction sector,” said AIA Chief Economist Kermit Baker.
That being said, the bump could result from client uncertainty about moving ahead with projects due to lingering tightness in construction financing and a growing labor shortage in the design and construction industries, Baker said.
Most economic forecaster, including CoStar Portfolio Strategy, predict that 2016 will see the largest amount of new rentable building area (RBA) delivered since 2008 in the multifamily, office, industrial and retail sectors.
Confirming that U.S. nonresidential building activity continues at a somewhat uneven rate across the country, an indicator of backlogged construction projects released by Associated Builders and Contractors (ABC) reached 10.3 months in the South during the third quarter, the highest reading on record for the indicator.
Nationally, the Construction Backlog Indicator (CBI) released Wednesday remained unchanged at 8.5 for the quarter, although it has declined by 3.5% year-over-year.
Despite the volatility, nonresidential construction remains one of the nation’s leading growth engines, said ABC Chief Economist Anirban Basu.
“Industry spending is up 11% on a year-over-year basis and the most recent backlog indicator strongly suggests that construction volumes will continue to recover,” Basu said. “Unlike prior years, both the private and public sectors are now contributing to spending growth.”