Good news from the economic front

We’re finally seeing some consistent economic movement in the positive direction. The American Institute of Architects, Washington, reported that their Architecture Billings Index has improved for the third straight month. The April rating was 48.5, a 2.4-point gain from the 46.1 March index. The April number represents the highest score since January 2008. Even more encouraging is that the new projects inquiry index is now firmly on the growth side at 59.6.
   “It appears that the design and construction industry may be nearing an actual recovery phase,” said AIA chief economist Kermit Baker, PhD, Hon. AIA. “The economic landscape is improving, although not across the board, but doing so at a gradual pace. It is quite possible that we will finally see positive business conditions in the foreseeable future.”
   The regional indices show growth in the Northeast (51.0), almost break-even in the Midwest (49.2), the South (46.5) below the national index, and the West (44.7) still struggling. The sector index breakdown shows: commercial/industrial (48.5), mixed practice (48.4), institutional (46.8), and multi-family residential (45.8).
   This is truly good news, made more so because a pattern of improvement is clearly in place. It’s not going to be a rapid recovery, but positive movement is a welcome relief.—Gary L. Parr

Jobs finally join the burgeoning economy

In the past couple of months the economy has been moving from a mixed-bag of news to primarily positive reports. The millstone has always been continued deterioration in the job market.
   Finally, with today’s announcement, the job market seems to be showing signs of a turnaround. According to a CNNMoney.com report, in November, the unemployment rate showed the largest decline in more than three years. Only 11,000 jobs were lost in November. Experts were expecting 125,000. September and October job losses were also adjusted down, resulting in a three-month positive trend.
   This comes on the heels of the most-recent Architecture Billings Index, as reported in the November issue of CBP’s E-Newsletter. The October index of 46.1 was the highest mark since August 2008 and a notable increase from the 43.1 September number. The new-projects inquiry score remained strongly in the growth category at 58.5.
   We all know that the job market is still rather lousy and the Architecture Billings Index, though improving, is still showing a declining market. But, as we reach the end of a very difficult year, it’s encouraging to see these key numbers heading north instead of south.—Gary L. Parr

AIA cranks at Congress

I have cranked on previous occasions about how frustrated I am that the river of government handout money for road repair seems to be a raging, never-ending torrent (Cranking here is one thing. You should hear me when I’m circumnavigating construction sites trying to get to work!!), while commercial construction firms can’t seem to get enough credit to be able to move a shovel full of dirt. The holdup doesn’t seem to be so much a desire to receive a D.C. handout as it does a need to have credit availability return to some level of sanity.
   Today, the American Institute of Architects, Washington, cranked a little at Congress.
   Here’s what the press release tells us was said: Tampa-based architect, Mickey Jacob, FAIA, unveiled the American Institute of Architects’ (AIA) Rebuild Renew plan for both short- and long-term economic recovery to the House Committee on Small Business at a hearing today. “Small business does not want a bailout. We want access to loans to bridge the economic downturn to help fund operational costs. We want relief from the premium costs of health insurance. We want incentives for people to build, buy, and renovate their homes and businesses. We want the availability of grants that assist in the acquisition and implementation of new technologies to keep small business competitive in the worldwide marketplace. These are investments in the future of the country,” Jacob testified (Download Mickey’s entire statement here.)
   The AIA Rebuild Renew Plan recommends these steps:

  • Make financing available for design and construction projects.
  • Provide tax relief for small businesses.
  • Make tax policies work for recovery.
  • Rebuild our infrastructure for the 21st century.
  • Build the new green economy.

   Download the AIA Rebuild Renew Plan here .
   I applaud the AIA for being proactive, not just today, but throughout this recession. I just hope that Congress starts to listen.—Gary L. Parr

Stimulus money for buildings?

One of the questions posed in my July/August issue editorial:

When are we going to see stimulus money spent on something other than roads?
   Not soon, according to a survey released July 30 by the Associated General Contractors of America, Arlington, VA. According to the report, “the stimulus plan appears to be having little influence on construction companies’ ability to expand payrolls to date. The disappointingly slow pace of construction spending outside of the transportation sector is one of the main reasons for the relatively small impact on new hiring.”
   Association CEO Stephen Sandherr said that we are five months into a federal stimulus program that has approximately $135 billion dedicated for construction projects and there is little difference in hiring and purchasing patterns between companies doing stimulus-funded work and companies that aren’t. He stated that while 36% of construction companies with stimulus-funded work plan to hire new employees, an almost identical percentage of firms without stimulus-funded work also plan to make new hires this year or next.
   Why? Very little of the stimulus dollars have resulted in actual construction work. The Army Corps of Engineers has $4.6 billion and has only paid out $84 million. The General Services Administration has $5.9 billion and has paid out only $12 million.—Gary L. Parr

AIA misses chance to tell positive construction forecast story

The American Institute of Architects, Washington, missed an opportunity Monday to shine a bright light on the non-residential construction market. A press release from that august organization, describing its semi-annual Consensus Construction Forecast,was titled “Significant Downturn in Nonresidential Construction Activity Projected through 2010.” I read that headline and my first thought was “how can 2010 possibly be worse than 2009?”
   Then I read in the first line of the release, “nonresidential construction spending is expected to decrease by 16 percent in 2009 and drop by another almost 12 percent in 2010 in inflation adjusted terms.”  That made me scratch my head a bit because that seemed like progress to me. So I jumped to the numbers. They also said progress:

  • Retail: -28% in 2009, -12.6% in 2010
  • Hotels: -25.8% in 2009, -16.8% in 2010
  • Office buildings: -21.5% in 2009, -17.3% in 2010
  • Education: -8.2% in 2009, -0.7% in 2010
  • Healthcare: -1.5% in 2009, -0.8% in 2010

   Maybe it’s just my optimistic view, but these numbers are telling me that the falloff in construction activity is slowing significantly and healthcare (0.8%) and education (0.7%) are basically projected to break even. Many people would consider that to be a victory. I was surprised and very encouraged to see that the drop in retail construction will be less than half of the 2009 number. I didn’t think we’d see retail progress of any kind for a couple of years.
   I doubt there is anyone who expects commercial construction to go from a significant slowdown to growth just because the calendar date changes. It’s going to take time for things to get back on the positive side, but this forecast tells me things are heading in the right direction. I also doubt that this forecast does a very good job of representing the extensive amount of remodeling/retrofitting work that is going on to make existing buildings more energy efficient/greener.
   In my mind, this forecast is good news, not another black cloud of disaster, and the AIA blew its first chance in a long time to make a positive statement.—Gary L. Parr