The Waiting Game
While new construction for the residential market is slowing beginning to pick up, the non-residential side is a completely different story. As Kermit Baker, chief economist for the American Institute of Architects (AIA), stated during a recent construction forecast, “It’s been a tough construction cycle. Even though most of the rest of the economy has been performing reasonably well, the construction sector has not caught up with it yet.”
Looking at the AIA’s Architectural Billings Index (ABI), Baker says it’s trending up, but very slowly. In terms of its different sectors, single family residential has been the strongest of late and, according to Baker, there have been some signs that once we work off excess multi-family inventory there might just be some improvement on the rental side as well.
Both the commercial and industrial sectors, as well as institutional, have leveled off and “we have not seen much in terms of promising signs in recent months and they don’t seem like they are ready to turn around,” says Baker.
Looking at the ABI on a regional basis, architectural firms in all regions are still reporting modest declines in activity. Firms in the Midwest, though, seem to be the closest in terms of recovery and the index also shows that firms in the Northeast have also done a little better than average in recent months.
While we all know times are challenging, we also know that eventually things will pick up and work will begin to flow. But the question everyone is asking is, ‘just when will it all turn around?’ There are lots of forecasts and predictions out there, but according to Baker, we can find one possible answer by comparing this recession cycle to those of the past. In doing so there are four benchmarks that might help give us an idea as to when we might just see the market turnaround. These benchmarks are: the stock market, gross domestic product (GDP), payroll employment and non-residential construction starts.
Typically, according to Baker, we begin by seeing improvements in the stock market, followed by some improvement in the broader economy (GDP). If that is sustained, then businesses will bring back payroll employment and if that continues to grow and businesses start to think about adding new facilities, that’s when non-residential construction starts are likely to pick up.
In this recession, the stock market hit its low in March 2009 and the general economy picked up around June or July 2009. In terms of payroll employment, Baker expects that to pick up probably by the second quarter and toward the end of the year we could possibly see an increase in non-residential starts.
Whether by the end of this year or sometimes next year, business will eventually return. In the meantime, find opportunities to stay up-to-date on the latest design trends and technologies—you’ll be able to apply your newfound knowledge in the future once business is again booming. Glass and glazing products are certainly evolving, and you’ll be able to check out some of these new developments at the AIA show, taking place in Miami (turn to page 10 for a sneak peek). And while at the show, be sure and stop be booth 925 to meet the staff of the Architects’ Guide to Glass & Metal. You can also pick up free copies of the magazine as well as information about our new digital edition and continuing education opportunities. We look forward to meeting you there!