Industry Outlook October 2023

Architecture Firms Report Stable Business Conditions in July

Billings at architecture firms remained flat in July, signaling mostly stable business conditions, reports the American Institute of Architects (AIA). The organization’s monthly Architecture Billings Index (ABI) shows that billings hovered at 50.0, slightly down from June’s reading of 50.1. However, any score above 50.0 indicates an increase in billings.

The ABI is a leading economic indicator that leads non-residential construction activity by approximately 9-12 months.

AIA officials say architectural firms specializing in commercial/industrial work reported their strongest billings growth in more than a year. The sector recorded a July score
of 52.7. Firms specializing in multifamily residential construction reported continued declines, scoring 45.4. Firms specializing in institutional work reported a score of 51.2.

Dodge Momentum Index Declines Again

A decline across all commercial sectors contributed to a decrease in the July 2023 Dodge Momentum Index (DMI). However, Dodge Construction Network reports that the
DMI remains 21% higher than in July 2022, signaling sustained health throughout the industry.

The DMI for July dropped 0.9% to 193.4 from a revised June reading of 195.1. Over the
month, the commercial component of the DMI remained somewhat flat, slipping 0.2%, while the institutional component declined 1.9%.

Hotel planning suffered the most setbacks in July while education and healthcare projects
slowed. The DMI remains 21% higher yearly than in July 2022. The commercial and institutional components were up 13% and 35%, respectively.

Residential Projects Contribute to Increase in Total Construction Start

The number of total construction starts rose 17% in July 2023 to a seasonally adjusted annual rate of $1.2 trillion, reports Dodge Construction Network. This follows a 9% decrease in June, led by a substantial drop in nonresidential construction starts.

July’s increase was propelled by a 38% rise in non-building starts and a 20% increase in residential starts. Nonresidential starts fell by 6%. Despite the overall increase in July, year-to-date total construction starts were 7% below that of 2022. Residential and nonresidential starts were down 21% and 7%, respectively.

Nonresidential building starts fell 6% in July to a seasonally adjusted annual rate of $334 billion. Commercial starts rose 11% due to gains in warehouse starts, off-setting a decline in office and hotel starts. Institutional starts were down 11%. Manufacturing starts dropped 39%. Residential building starts rose 20% in July to a seasonally adjusted annual rate of $414 billion. Single-family starts gained 2%, while multifamily starts rose 62%.

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