U.S. architecture billings index up in October

October ABI up 2.5 pts to 49.4

* New projects index up 3 pts to 57.3

* AIA says demand for architects’ services volatile

* New projects index up 3 pts to 57.3

* AIA says demand for architects’ services volatile

A leading indicator of U.S. construction activity rebounded in October, the AIA said on Wednesday.

The architecture billings index rose 2.5 points last month to 49.4, according the American Institute of Architects. Any reading below 50 indicates an overall decrease in demand for design services, a predictor of construction spending nine to 12 months in the future.

A separate index of inquiries for future projects rose 3 points to 57.3. That measure is more often above 50 as clients reach out to multiple architecture firms.

October’s rebound was encouraging, but demand for designs remains volatile, the group said. Conditions in various regions range from improving to poor and are likely to continue that way in coming months, the AIA said.

Conditions are strongest in the U.S. Northeast and weakest in the West.

A depressed construction market has been a headwind for manufacturers of construction machinery and components that make up buildings’ infrastructure, such as electrical, cooling and security systems.

Analysts who cover industrial stocks have called the billings index as important an economic indicator as the monthly industrial data from the Institute for Supply Management.

Most diversified industrial companies get at least some revenue from the nonresidential construction sector, which includes office buildings, retail and warehouse space, and institutional buildings such as schools and hospitals.

Companies exposed to the sector include Honeywell International Inc , Tyco International Ltd , Ingersoll Rand , Eaton Corp , Caterpillar Inc , Deere & Co and Terex Corp .

European companies such as Siemens AG , Schneider Electric SA and lock maker Assa Abloy are also significant players in the sector.

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CONTOURS: What Should Architecture Occupy?

But here is an interesting paradox that hasn’t occurred in the architectural bloc just yet: if the people #OWS are talking about , the so-called “99%” were doing better financially there would be a vastly larger pool of potential clients for architects. This might sound simplistic, but it just might make sense. Think of it this way: architecture’s wealthiest clients are still doing well in the recession. In fact they may even be doing better than before. But architecture itself was one of the earliest and hardest hit industries.

Studies have shown that the wealthy top 10% and the super-rich “1%” are incapable of generating sufficient economic impact to sustain capitalist prosperity and fuel economic growth. This happens only when there is a strong working- and middle-class base. It makes sense. 1% of the people, no matter how wealthy, cannot and do not, consume as much as a strong, solvent, working- and middle-class, i.e. most of the people.

This is because, for all their ostentatious displays of wealth, the rich are notorious for being stingy penny-pinchers. Ever had a wealthy client fight you tooth and nail over the budget for that luxury home you designed or the fee you charged for your professional services? Moreover, the wealthy are the ones who pull the plugs on larger institutional or speculative investment projects because the economy put them in a mode of extreme caution.

It’s worth repeating: Architecture needs more consumers, not less. Architecture depends on a growing economy, not a contracting and ever-stratifying one. The only effective way to grow the economy, many economists argue, is to have a strong middle class capable of supporting it and driving demand. The wealthy alone can’t do it and evidence shows that when the economy contracts, they won’t.

History has also shown that when the middle are doing well the top does far better. This could be one reason billionaire investment banker, Warren Buffet thinks he and his cohort should pay more in taxes. He understands how a capitalist economy works. He and his pals win more when we are all #winning.

Architecture, as an economic sector, wins when these basic economic principals are being strengthened. So, as counter-intuitive as it seems, the AIA should be lobbying congressional leaders in support of fair and equitable taxation of the wealthy, even though for now, this is where the dominant client pool resides. But if they helped create wealth in all of our classes of society, we would all have more clients, not fewer.

That means that the AIA needs to stop just lobbying for more stimulus money, more federal building projects, and funding for the “greening” of federal buildings. These strategies do not do enough for the profession because they are short-term, band-aid fixes. In short, stop asking for handouts. Instead, have foresight and look at the long- term. Because what will have a more far-reaching impact will be lobbying for what economists (and now Occupy Wall Streeters) have been arguing for years.

Here is a good example of how the AIA and OWS actually have a lot in common: the debate over the deficit. How does this work? First, the AIA’s most-recent lobbying efforts in Washington DC have been focused on educating the Joint Committee on Deficit Reduction on the importance of not making cuts that would impact the built environment, i.e. architects and their colleagues in engineering and construction. Please, please, please don’t make any cuts to the Federal Budget that would further damage our profession that has already been severely damaged by the continuing recession. As Christina Finkenhofer, manager for AIA Federal Relations, noted in her recent report, “AIA members have stressed that cuts disproportionately affecting the built environment will stunt America’s growth, jeopardize the safety and reliability of the country’s infrastructure, and stifle the already struggling economy. Only time will tell whether the Committee agrees with that assessment.”

While the AIA is technically correct in its assessment of the importance of the built environment (no surprise there), it is ignoring the fact that this is a very narrow interpretation, one that is solely concerned with the architecture industry and seemingly cares nothing for anyone else. It also ignores the opportunity posed by OWS to inflect its lobbying efforts toward a greater good, which is the re-structuring of the financial and banking sectors and an end to Bush-era deregulation and tax cuts for the wealthy. Repeatedly, the AIA has shown itself ignorant to the fact that sound financial practices that promote the growth of a strong working- and middle-class (and by extension a stronger upper-class) will strengthen architecture as an economic sector. That is the true trickle-down theory at work—though it’s more trickle up.

Therefore while the AIA might be interested in helping to protect the narrow interests of wealthy clients it should keep in mind that it would do much better in the long-run to support the wider interests of the middle majority, the vast numbers of people currently being represented by the concerns of #OWS. The reason #OWS is growing in popularity is because increasing numbers of rank-and-file citizens, feel #OWS better reflects their concerns about the economy than the government.

Attempts to gather information concerning #OWS from architects and architecture

students have been met with silence so far. It is likely that people in the profession don’t see how it is relevant to them. This passivity might be aggravated by either generation or by one’s membership in either the management class or the architectural working class.

But when it comes to the economic well-being of the nation, especially with the possibility of a “double-dip” recession looming, architects have more in common with #OWS than might be apparent. They, along with the AIA, should be on the same side of the economic argument. After all, architects are famous for making utopian proposals. Then how about making a utopian proposal rooted in sound economic principals that will foster long-term growth and lead to greater economic stability? The middle has been weakened and chipped away at for the last three decades and we are now seeing the outcomes of this. And that fact has not served architecture well (despite the nice projects you see in the glossy magazines—that is only a small part of the picture).

So, here is a utopia to imagine: Imagine a society where there is a strong working- and middle-class that is well-educated in public schools funded by taxes and that these well- educated folk are interested in the health and beauty of their built environments. Imagine the middle majority in financial positions stable and well-off enough to hire architects for custom homes and “green” renovations on existing homes (there was a time when architects did homes that were not merely for the super-rich but for the middle because the middle could afford it). Imagine architects being able to run their businesses so that all their employees were in the middle class, able to pay off their student loans and able to purchase architecture of their own. Just imagine the impact this would have on the crumbling built environment, on people’s shattered optimism and confidence. Imagine what architecture could do with a fraction of the passion being expressed by the swelling ranks of #OWS. This is why architects should pay attention to what is finally being expressed by the people.

Source: Archinect

After Upturn, Architecture Billings Fall Again

Recession’s toll likely to keep many from returning to the profession, says AIA’s Work-on-the-Boards panel

By Kermit Baker, Hon. AIA
AIA Chief Economist

After an encouraging uptick in August, the AIA’s Architecture Billings Index (ABI) retreated again in September, falling to a score of 46.9. Since any score below 50 indicates a decline in billings at architecture firms, this was the fifth of the past six months in which business conditions have deteriorated. Additionally, backlogs at architecture firms—the amount of project activity in-house at present—dropped to 4.2 months on average in the third quarter, meaning that firms could keep current staff employed for 4.2 months without any new projects. This rate is down from 4.4 months at the end of the second quarter. Lower levels of project backlogs, coupled with less encouraging levels of new project inquiries in September, point to continued concern for architecture firms in the coming months.

Even with the national downturn in billings in September, some regions reported improvement. Regional billings scores are computed as rolling three-month moving averages, and recent numbers showed enough strength to boost scores for firms in the Northeast and Midwest into positive territory. Scores for firms in the South and West continued to show relatively steep declines.

Likewise, commercial/industrial firms reported reasonably healthy improvement in September, while residential firms and institutional firms were showing continued weakness. Commercial/industrial firms reported nine straight months of billings gains from mid-2010 through the first quarter of 2011, so there are grounds for optimism for firms in this sector.

Economy remains in slow gear

The broader economy continues to show only modest growth. Just over 100,000 jobs were added in September, bringing the total added for the first nine months of the year to just over one million. That is well below the number required to generate healthy growth in the economy, and, as such, the national unemployment rate is up from 9.0 percent in January to 9.1 percent in September.  Construction employment saw an increase of 26,000 positions in September, the second strongest number of the year. However, only 53,000 positions in this sector have been added since the beginning of the year, or fewer than 6,000 per month. Architecture firms have added only 1,200 positions since January, to a current workforce of just over 153,000 in August, the most recent figures available.

Many economists feel that one of the key ingredients missing from the economy is greater confidence on the part of consumers and businesses.  With a more positive outlook, consumers would start spending again, and businesses would begin adding employees and increasing their spending. But, unfortunately, business confidence has been falling recently. The third-quarter reading on the Conference Board Measure of CEO Confidence was 42 (anything below 50 is considered negative), the lowest score since early 2009, down 25 points since the first quarter of the year.

Consumer optimism has not fared much better. Consumer sentiment has fallen in four out of the past five months, according to the University of Michigan Consumer Sentiment Index. With a preliminary October reading of 57.5 (on an index where Q1 1966 is set at 100), it’s down almost 17 points from its 74.2 reading in January. In spite of consumer concern over the economy, consumer spending is holding up quite well.  In September, retail sales increased almost 9 percent over levels of a year ago, and average monthly gains in 2011 over levels from a year ago have been averaging about 8 percent. By comparison, there had been a 6.5 percent increase in retail sales in 2010, and a 7.2 percent decline in 2009.

Permanent losses to the profession

Employment at U.S.architecture firms peaked during the summer of 2008, and exhibited steady declines for the next two years. For the past 12–15 months, employment levels have been bouncing around this bottom rung. This prolonged downturn has meant that many architects who were downsized at the beginning of the economic crash have been waiting a very long time for a recovery. This month, participants in the AIA Work-on-the-Boards panel were asked to comment on the current status of these downsized architectural staff.

Many who lost positions have either returned to their original firms, gone to other firms, or started their own architectural practices. However, those not currently working full-time in the profession are in a diverse set of situations. According to these estimates, about 30 percent of previously full-time staff who lost their positions are still working in the architecture profession, but are underemployed and working on a part-time or contract basis. These are likely the first people who would return to full-time status once design activity shows a more significant rebound. Well over a third of downsized staff is currently out of the profession, but waiting for business to pick up to return to architecture positions. This includes about 18 percent working in other jobs, but waiting for architecture positions to open up, and almost as many who are currently not working and waiting for architecture positions to open up.

However, this leaves a significant number of former employees who are not expected to return to the profession at all. About 9 percent are retired or not looking for work for other reasons. More than 12 percent are working in other jobs and are unlikely to return even when architecture positions open up. Nearly 6 percent are not currently working, but are unlikely to return to architecture even when the economy improves and positions open.

This month, Work-on-the-Boards participants are saying:

• We specialize in residential and have stayed in business doing multifamily, as the single-family residential market is dead. Firms that held on with government work are now slowing down significantly. —7-person firm in the West, residential specialization

• RFPs have dropped to first-quarter levels. Some projects already under contract have been slow to get the owner to agree to finalize and send out to bid. —4-person firm in the Northeast, mixed specialization

• Our office interiors and retail work for large corporate clients are strong, but government, education, etc., are very weak. —60-person firm in the South, commercial/industrial specialization

• Larger companies are going after local work instead of their typical national work, so smaller companies are having a struggle to get work. We typically have been doing 90 percent national work and 10 percent local. It is now 90 percent local and 10 percent national.  —50-person firm in the Midwest, commercial/industrial specialization

Reference:

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About the AIA ArchitectureBillingsIndex

The Architecture Billings Index (ABI), produced by the AIA Economics and Market Research Group, is a leading economic indicator that provides an approximately nine- to 12-month glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is 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, as compared to the prior month, and the results are then compiled into the ABI. These monthly results are also seasonally adjusted to allow for comparison to prior months. The monthly ABI index scores are centered near 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline. The regional and sector data are formulated using a three-month moving average. More information on the ABI and the analysis of its relationship to construction activity can be found in the white paper “Architecture Billings as a Leading Indicator of Construction: Analysis of the Relationship Between a Billings Index and Construction Spending” on AIA.org.

Frank Gehry Turns to Asia for Architecture Projects as U.S. Growth Slows

Frank Gehry, designer of Los Angeles’s Walt Disney Concert Hall, is seeking projects in Asian countries including China and India as slower U.S. growth crimps development in the world’s largest economy.

The architect said he’s competing to plan a museum in one of China’s fast-expanding metropolitan areas, as well as a “very spiritual kind of a building” in India. He declined to give further details. Gehry designed an aquarium as part of the recent redevelopment of the Ocean Park attraction in Hong Kong.

Gehry, 82, is turning to Asia as developers start few projects in the U.S. The Architecture Billings Index, an indicator of American construction, plunged to 46.9 last month from 51.4 in August, reflecting lower demand for design services, according to the American Institute of Architects. Any score less than 50 indicates a decline in billings.

Meanwhile, “there’s an art explosion in China,” Gehry said in an Oct. 25 interview at Bloomberg’s Los Angeles offices. “It’s really great — very exciting.”

He expects to sign a contract within three to four months should an agreement be reached for the Chinese museum. One challenge of designing in a country such as China is the lower pay for projects, Gehry said. Architects get paid a percentage of construction costs, which in China are about a third of what they are in the U.S., he said.

“If you take a percentage and you work with western salaries, you can’t make it work,” Gehry said. “So it almost forces you to open an office in China and work with local people.”

Staying Near Home

Gehry said he would prefer to travel less and focus on projects in California or New York. The lack of development in the U.S. along with employees at Los Angeles-based Gehry Partners LLP who depend on him are forcing him to look elsewhere, the architect said.

“I have over 100 people in my office,” he said. “At my age, I would love only to work in Los Angeles, maybe Santa Monica, maybe Beverly Hills.”

Construction of one of Gehry’s projects abroad, the 450,000-square-foot (42,000-square-meter) Guggenheim Abu Dhabi museum, was halted earlier this month by Tourism Development & Investment Co. as the emirate scales back plans made before the 2008 financial crisis.

“The Abu Dhabi building we’ve been working on in the last five to six years has been stopped, and that’s painful,” said Gehry, who also has a contract for the Dwight D. Eisenhower Memorial in Washington.

New York Apartments

Gehry, who designed a Manhattan apartment building on Spruce Street that opened earlier this year, also is seeking to win contracts by cutting construction waste, which often accounts for 30 percent of a development budget. His Los Angeles-based Gehry Technologies Inc. employs the same type of computer-aided, paperless, three-dimensional design used to build Boeing Co. (BA)’s 777 airliner.

“With two-dimensional drawings there’s a lot of room for error,” said Gehry, the 1989 winner of the Pritzker Architecture Prize. “It creates so-called clashes that will result in costly change orders.”

There were few such conflicts at the 76-story Manhattan tower — called New York by Gehry, and developed by Forest City Ratner Cos. — even with its rippled and curved bay windows, according to Gehry. Almost 600 units of the 900-apartment building have been rented, he said.

“You’ve got to respect budgets because people are investing and building and have certain finite resources,” Gehry said. “So it behooves us to respect that.”

To contact the reporter on this story: Nadja Brandt in Los Angeles at [email protected]

To contact the editor responsible for this story: Kara Wetzel at [email protected]

Boost to real estate and construction 9-12 months away?

Architects, along with land planners and civil engineers, are involved in the beginning stages of a project, so they are among the first to feel a recession — and a recovery.

It’s too early to say whether a recovery is at hand. But the downward spiral could be over, some industry experts say.

“It seems we are pulling out of it,” Farmer said. “We’re seeing increasing revenues, and we’re starting to see a little bit of profit.”

What’s more, the American Institute of Architects, after seeing five consecutive monthly declines in activity, reported a sudden upturn of activity in August in its billings index.

The index provides a nine- to 12-month lag time between architecture billings and construction spending, or a glimpse into the future of commercial construction activity.

“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said Kermit Baker, chief economist of the architects’ trade organization.

“Many firms are still struggling, and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.”

The index is centered on 50, with scores above 50 indicating an aggregate increase in billings and scores below indicating a decline.

In July, the index score was 45.1, the steepest decline in bbillings since February 2010, the trade organization reported. But the index reversed in August, shooting up to 51.4 percent.

Despite the recent upturn, “the extent of the (previous) decline was pretty serious,” Baker said, attributing the low index numbers to nervousness about the U.S. and global economies.

Architectural billings were improving at the end of 2010, showing stability and modest growth in the beginning of 2011, Baker said.

“There was a general sense the economy was improving and then … (the numbers) dropped off the end of the table and turned dramatically.”

Many projects are still on hold, Baker said. “Others are moving slowly and in fits and starts.”

Source: Richmond Times Dispatch

Building 7 at World Trade Center now fully leased

The controversial 52-story skyscraper just north of the World Trade Center has finally been fully leased. Developer Larry Silverstein announced Monday that MSCI, a provider of investment decision support tools, would occupy the remaining floors 47 through 49, the AP.

Bernstein had long had troule attracting tenants in part because Seven World Center came under fire for opening too quickly at the site of the old World Trade Center Building 7 — the last building to collapse in the Sept. 11, 2001 terrorist attacks.

But the site was also the focus of many conspiracy theories, all of which pointed out that Building 7 was the first known building to collapse as a result of uncontrolled fires, and some of which claimed that the U.S. government had been behind the attacks.

The building also cost a pretty penny, with tenants paying the highest prices ever paid downtown — several above $70 a square foot.

Source: The Washington Post

NY building costs rise and jobs drop

Rising materials prices and higher wages set by new labor agreements are causing New York construction costs to rise for the second year in a row after a decrease in 2009.

Architecture Billings Index rises in August

The American Institute of Architects Latest from The Business Journals Architecture index back in black, reverse surprises economistArchitecture index back in black, reverse surprises economist Ripken bringing his baseball ‘Experience’ to local youth Follow this company ’ Architecture Billings Index rose in August after four straight monthly declines.

The national index was 51.4 in August, following a very weak score of 45.1 in July. Any number above 50 indicates an increase in billings. The new projects inquiry index, which represents the number of inquiries from clients about new projects, was 56.9, a sharp increase over the 53.7 posted in July.

“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said the AIA’s chief economist, Kermit Baker, in a news release. “Many firms are still struggling and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.”

The regional billings indexes for August were 49.0 in the Midwest, 47.4 in the South, 47.4 in the West and 46.5 in the Northeast.

US architects salaries stagnant, AIA survey finds

Latest US billings index and employment figures also gloomy

US architects’ pay is “stagnant,” according to a new American Institute of Architects (AIA) survey.

The average salary for senior design or project management staff is $94,900 (£58,773), compared with $98,800 in 2008 and $85,800 in 2005.

The average salary for architects/designers is $71,600, unchanged from three years ago but up from $57,700 in 2005, the survey found.

AIA chief economist Kermit Baker said: “In addition to reducing benefits offered to employees, architecture firms have been faced with devastating conditions and had to make difficult reductions in expenses. Salary freezes or reductions, scaled-back hours, the conversion of full-time to part-time or contract employees and mandatory furloughs have all taken a toll on the compensation of architects.”

The AIA noted that the architecture profession had been “hit especially hard” as the construction industry continued to suffer the effects of the prolonged economic downturn.

The survey comes on the back of disappointing employment figures in the States. The construction industry added 24,000 jobs nationally in the first three months of the year – the first quarterly gain since 2006 – before returning to contraction by losing 9,000 jobs overall in the second quarter.

Meanwhile, the latest architecture billings index showed a fall for the third month in a row, reversing nearly all of the improvement generated during late 2010 and spring 2011 when there were five straight months of positive conditions.

Source: BD Online.co.uk

Recession, Stage II

While the economy has stabilized in some regards, architects are still suffering.

Just when it seemed that the architecture industry might be pulling out of its tailspin, some key economic indicators are suggesting that a recovery might take longer than expected.

The Architecture Billings Index, a measure of the industry’s health compiled by the American Institute of Architects, has dipped below 50 for three consecutive months, posting scores of 47.6 (April), 47.2 (May), and 46.3 (June). Those dips came after five straight months of the ABI hovering at or above 50, a sign of increased activity.

Moreover, Engineering News-Record’s Construction Industry Confidence Index—based on surveys sent to contractors, subcontractors, engineers and architects—fell five points in the second quarter of 2011, from 51 to 46.

That data doesn’t surprise architect Charles Dalluge of the Omaha-based firm Leo A. Daly, which has 31 offices around the world. Even though some architects were publicly predicting that “it would be heaven in 2011,” he says, a lot of firms are still suffering.

And he might know. In June, his firm laid off 50 employees from various offices, including architects and engineers. Dalluge defends the move as part of a “strategic repositioning” that will result in the hiring of 50 workers with specialties in areas of growth, such as healthcare. The firm now has 900 employees. 

But even a healthcare focus may not be enough to keep some firms alive. In June, Karlsberger, a Columbus, Ohio-based healthcare-focused firm, closed after 83 years in business. None of the firm’s managers would comment on the shuttering, which is believed to have resulted in 40 job cuts. A statement on its website, however, blamed the state of the market for its woes. “Our level of revenues are insufficient for us to meet our ongoing obligations,” it says.
 
Karlsberger’s former president, Mitchel Levitt, who resigned in April 2010 after 31 years, told RECORD that the firm lost a major lawsuit that made it difficult to go on. The suit was brought against Ohio State University, one of Karlsberger’s largest clients, over the school’s termination of a contract for a $1 billion medical center expansion; the lawsuit was dismissed in December. “It probably hurt them,” Levitt said in an interview conducted in June. “But I thought they had done what they needed to do to continue to operate.”

While the new office building market may show few signs of turnaround, especially while jobs are scarce, a bright spot appears to be college work. Many schools’ endowments were wiped out in the recession but are now being replenished by a robust stock market, which means that many stalled university projects are back on track.

Indeed, the economic downturn suspended a renovation of Yale’s 1928 Swartwout Building, designed by Egerton Swartout. But that project recently resumed, says Richard Olcott, partner at New York-based Ennead Architects, which is overseeing the renovation. Olcott adds that his firm didn’t lay off any workers during the recession; in fact, it hired 40 people in the last year, including architects, for a grand total of 160 employees.

Even public universities, once hurt by dwindling tax-collection revenues, are restarting projects, according to Ayers Saint Gross, a Baltimore design firm at work on a once-stalled science building for the University of Delaware.

The firm added 18 people last year and is now looking to hire five more, including architects. It now has 130 employees, its highest-ever headcount, said Adam Gross, a principal. “I think the indicators are pretty serious,” he said, referring to the ABI and other worrisome data, “but not as serious as we experienced” in the fall of 2008.

Source Architectural Record