The American Institute of Architects has published a white paper, “Clarifying the Construction Outlook by Integrating Architecture Billings with Broader Economic Indicators,” examining the performance of the AIA/Deltek Architecture Billings Index. Amid economic uncertainty, the paper looks at how architecture firms and the broader architecture, engineering and construction industry use the index and related indicators to assess current market conditions and forecast building activity.
The analysis updates the relationship between the index and construction spending. AIA finds a slightly weaker correlation but a longer lead time, which it attributes to extended project schedules driven by supply chain challenges, cost inflation, interest rate volatility and economic uncertainty.
AIA launched the Architecture Billings Index in 2005 as a leading indicator of construction activity. Because design work comes before construction, the broader building industry relies on the data for planning, and architecture firms are often the earliest comprehensive source of information on proposed projects. A 2014 update, “Designing the Construction Future,” added design contracts as a leading indicator of future billings and adjusted the relationship between design activity and construction spending to reflect the Global Financial Crisis.
Several events have affected the timing and strength of that relationship since, AIA says. They include the slow recovery of the nonresidential building sector after the Global Financial Crisis, pandemic disruptions, and recent economic and political uncertainty that has complicated development and construction planning. The paper also notes the industry’s reliance on a range of indicators, including construction spending and starts, building material costs, real estate trends and AIA’s Consensus Construction Forecast.
