Category Archives: Architects

Architecture Billings Index says Q3 GDP should be muted

Architecture Billings Index says Q3 GDP should be muted

Tom McClellan
Editor, The McClellan Market Report

Chart In Focus

The preliminary report of 3rd quarter GDP for the U.S. is due out on Friday, Oct. 26, and so far the consensus expectation is for a rise of 1.9%.  But my analysis of the data from the American Institute of Architects shows that the Q3 number could be even lower than that.

What the AIA does is to survey its member firms to see what they have to say about both actual billings from current customers and inquiries about potential new projects.  The two pieces of data are reported each month by the AIA, and I have found that they give good information about what the GDP numbers are likely to do.

This week’s chart compares a 6-month simple moving average of the “inquiries” data (as opposed to the actual billings which the AIA also tracks).  It makes a pretty good model for what overall GDP will do.  The implication is that Q3 should see a drop in growth rate versus Q2, but still positive.

The ABI data and GDP data are concurrent in real time (i.e. no leading indication), but in reporting time there is a lag due to the delay in getting out the GDP data.  So by watching what the monthly reports of the ABI data have been saying, we can get a really good idea of what the GDP numbers will be.  We have to keep in mind, though, that what the statisticians report for the preliminary GDP number may differ quite a bit from the later final numbers, and indeed they may differ from real life.  But for anyone who finds it useful to watch the reports on GDP, this ABI data can be a useful way to model that data.

Interestingly, we are also just hearing bullish reports out of some of the big nationwide homebuilding companies.  But we should all filter that bullishness through an examination of what the ABI data have to tell us about home sales.

This next chart looks at the raw monthly ABI Inquiries data versus home sales as reported by the Census Department.

ABI Inquiries vs New Home Sales

The Inquiries data saw a spike peak in February 2012, but has remained pretty tepid since then.  So the Architecture Billings Index data is not yet saying that a big spike up in new home sales is looming anytime soon.  It is worth noticing in this chart that the most recent readings on new home sales are still not even back up to the incentive-fueled levels seen in 2009 and early 2010.  So to paraphrase what Mark Twain once said about his own death, rumors of a huge housing recovery may have been greatly exaggerated.

For more information or would like to subscribe to the Architecture Billings Index dataset, please contact James Chu, Director of Market Research at the American Institute of Architects, or (202) 626-8045.

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Architect Shortage Ahead?

Architect Shortage Ahead?

By Building Experts Team

Architect 300x200 Architect Shortage Ahead?According to a rash of recent articles that might be the case. When the housing market burst in 2008 many architects found themselves out of a job as firms, both large and small, closed their doors or laid off a majority of their workforce. In addition, recent architecture graduate students found the prospective of even a low paying internship daunting, with many exiting the industry within months of graduating.

For those architects who decided to stick it out and weather the economic storm, the last four years have been an uphill battle. Projects have been sparse and far between and many older architects, who younger architects considered their mentors and teachers, decided to “retire early” to avoid the effects of a failing economy. Many industry insiders believe the combination has left a large hole in the growth of the architecture profession, both by the numbers and in terms of skills and experience. Unfortunately, the negative effects may be felt by the industry as early as 2014.

According to a recent survey of 1,007 U.S. designers, conducted by McGraw-Hill Construction, “found that nearly one-quarter of respondents anticipated a shortage of architects.” Furthermore, of the firms surveyed, “ both large (more than 50 employees) and small (less than 10) anticipated some kind of shortage of designers, but nearly half of respondents from larger firms expect it to be severe.”

And the anticipated shortage won’t be a problem for just designers, but also for the laborers and builders. As the housing market begins to revive itself in many regions across the country, builders are starting to talk about the looming labor shortage, which for many is already here. In a recent Housing Zone article, the author, a building developer, talks about the shortages he is hearing about in many cities in Texas, as well as Nashville and Charlotte. Similar to the design industry, the few workers that have remained don’t possess the experience, knowledge and skills their predecessors did, which makes for a very uncertain and shaky future.

As design firms and builders begin to rebuild their firms, win larger projects, and grow their workforce, it will be essential for them to market themselves as the workplace of choice. Although no one can predict what the next few years will hold, what we do know is that the industry landscape is changing, drastically. Being flexible and thinking strategically are essential concepts for architecture firms and builders to embrace now in order to attract top talent and prosper in the years ahead.

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