This year’s strong pace in design
activity continued enthusiastically into February, pointing to an
oncoming jump in nonresidential construction spending during the second
half of this year. The AIA Architectural Billings Index (ABI) was 54.9
for February, signifying the strongest growth in billings at
architecture firms since the downturn began in early 2008. The inquiries
index was at 64.8 for the month, again the strongest reading since the
design recession began.
Underscoring the growing strength across the profession are the
regional billings scores from last month. Firms in each of the four
major U.S. Census regions recorded scores in excess of 52 in February,
with a high of 56.7 for the Northeast. For each of the past five months,
scores in all regions have been above 50, indicating a broad-based
recovery in design activity that appears to have survived the recent
uncertainty surrounding the federal budget and debt negotiations.
Additionally, each of the major building sectors served by
architecture firms saw growth in design activity in February. The
reading for the residential index was 60.9, and this index has been
above the critical 50 level for 10 straight months now. This residential
upturn seems to be providing momentum to the nonresidential building
sectors.
The commercial/industrial index reading was 53.3 in February, the
third straight month that billings activity exceeded 52 for this sector.
Even the institutional index was above 50 for the month, and has been
above the 50 threshold for seven straight months. However, growth has
been extremely weak, as readings for this sector have barely exceeded 50
over this period. Without more acceleration, institutional design
activity in the days ahead may well see some monthly declines mixed in
with growth.
Economy survives federal budget impasse
In spite of ongoing concerns over the “fiscal cliff,” the
sequestration of federal spending, the threat of a federal government
shutdown, and the prospect of federal borrowing bumping up against the
debt ceiling, the broader economy continues to make slow but steady
gains. Through the first two months of the year, there has been a net
increase of 355,000 payroll positions, with 73,000 of those positions
(more than 20 percent) added in the construction sector. Much of the
construction growth has been in housing, as housing starts increased 28
percent nationally in 2012.
A significant share of the recent improvement in construction,
however, is coming from the nonresidential sector. Through the first two
months of the year, almost 32,000 positions have been added by
residential contractors (general contractors as well as special trade
contractors), while almost 28,000 have been added to nonresidential
contracting firms, accounting for 38 percent of all positions added to
the construction industry. Heavy and civil engineering contracting firms
have added the remaining positions within the industry.
Prospects remain for continued steady growth in the wider economy,
and in the construction industry for the remainder of this year. A
rising stock market points to profitable U.S. businesses, which should
encourage more capital spending as the year progresses. This improvement
can already be seen in the payroll levels at U.S. architecture firms,
which increased by about 2,000 positions last year. However, both the
architecture profession and the construction industry still have a long
way to go to get back to typical levels seen last decade.
Increasing stringency for building codes and regulations
In spite of a weak construction market in recent years, architects
are reporting generally increased stringency in building codes and
regulations. When asked if building codes and regulations in general had
changed significantly in recent years, almost two-thirds of survey
respondents indicated that they had become more stringent, while fewer
than 2 percent indicated that they had relaxed. The remaining third felt
that they hadn’t changed significantly.
The perceived increased stringency of building codes and regulations
varied a lot by the type of code or regulation. For example, of the
respondents that felt that codes and regulations had changed in recent
years, 93 percent of firms reported that energy codes had changed
substantially. Similarly, 76 percent of firms working with accessibility
regulations pointed to a change. At the other extreme, few respondents
pointed to significant changes in homeowners’ association standards or
in historic preservation regulations. By building type, respondents felt
the greatest changes were for commercial buildings and the least for
industrial facilities.
Meanwhile, these perceived changes in building codes and regulations
are altering project design and construction costs. Of the respondents
who reported significant changes in building codes and regulations, 26
percent felt that they had increased design costs by a significant
amount, and an additional 61 percent felt that they had increased design
costs by a modest amount. For construction costs, 34 percent felt that
changes in codes and standards had increased construction costs by a
significant amount, and 58 percent felt construction costs increased by a
modest amount.
This month, Work-on-the-Boards participants are saying:
• Big-box stores and corporate chains predominate, providing little if any opportunity for local, smaller firms.
—One-person firm in the Midwest, institutional specialization
• The design recovery for Superstorm Sandy has had a huge impact on inquiries for new design work.
—Three-person firm in the Northeast, residential specialization
• The sequester has stopped a large number of new federal projects,
and will have a long-ranging effect on the design industry, especially
in the Washington, D.C., area.
—20-person firm in the South, institutional specialization
• Private developer projects that have been sitting on the shelf are finally moving forward.
—Six-person firm in the Northeast, commercial/industrial specialization
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