Good news for economic forecasters who feared the continued rise in the Architecture Billings Index (ABI) would fizzle out after a strong performance in April. Today the American Institute of Architects (AIA) released its latest figures for May 2021, and the demand for architectural services is at a record high.
Just how high? The ABI, a composite measure of demand and signed contracts, reached 58.5 in May, up from 57.9 in April (again anything over 50 is an increase from the previous month, everything below a decrease). This is the fourth consecutive month of profits, and according to AIA, that number of 58.5 is one of the highest in ABI’s 25-year history.
“Despite rising costs for building materials and delivery delays, design activity is picking up again as more and more places are reopened,” said AIA chief economist Kermit Baker in the AIA press release and the looming labor shortage could dampen the emerging recovery in the construction industry. “
At a more detailed level, there were particular standouts that indicated a continued recovery in the sector. The Project Inquiry Index, which tracks interest in future projects, shot to 69.2 in May (technically lower 70.8 in April, but still up), indicating continued strong demand. Meanwhile, the design contract index, which represents new design contracts, hit a record high for the second straight month, rising from 61.7 in April to 63.2 in May – it seems developers are giving their money where they are and are comfortable feel when they sign up again to rebuild.
Demand also remained strong regionally, although not uniformly. The Midwest continued its hot streak, climbing from 60.6 in April to 63.4 in May, while the South saw similar gains, climbing to 59.0 from 58.3 in April. Meanwhile, demand in the west finally started to pick up, reaching 57.4 in May from 52.4 in April. The northeast, the region hardest hit by the pandemic, continued to lag behind all other regions, rising “only” from 55.0 in April to 54.2 in May – a slight increase, but nothing impressive.
In sectoral terms, even project types that had been badly hit during the pandemic (e.g. institutional projects that withered with a projected loss of tax and study revenues) continued to recover. Businesses specializing in commercial and industrial labor saw demand spike again as the ABI hit 60.6 in May, up from 59.1 in April, likely due to the removal of lockdown restrictions. Demand for firms working on multi-family housing projects rose from 56.9 in April to 59.5 in May, while institutional demand also continued to rise, reaching 57.1 in May, up from 56.7 in April. Finally, demand rose to 57.9 in May, even among mixed-practice companies.
As Baker noted, much of that surge is likely being curbed by sky-high building material prices and impressive, but still lagging, vaccination rates in the United States. However, wood costs have fallen from their record highs in May, suggesting that supply is finally catching up with increased demand – that’s likely a good sign for June ABI numbers.