Volume 47, Issue 10 - October 2012


Decline in Architecture Billings Index Slows During July

The Architecture Billings Index (ABI) pointed to a slower decline in July in design activity at U.S. architecture firms, according to the latest report from the American Institute of Architects (AIA).

The ABI reflects the approximate nine- to twelve-month lag time between architecture billings and construction spending. The July ABI score was 48.7, up from 45.9 in June. Though the number is up from June, the AIA reports that any score below 50 indicates a decline in billings.

The new projects inquiry index, however, was 56.3, up from mark of 54.4 the previous month.

“Even though architecture firm billings nationally were down again in July, the downturn moderated substantially,” says AIA chief economist Kermit Baker. “As long as overall economic conditions continue to show improvement, modest declines should shift over to growth in design activity over the coming months.”

AAI Motions for Authorization of Asset Sale
American Architectural Inc. (AAI) has requested permission from the U.S. Bankruptcy Court for the Eastern District of Pennsylvania to sell its assets, including several outstanding subcontracts, via an auction process. The motion was filed as part of the company’s ongoing Chapter 11 bankruptcy case, filed in June (see related story in July USGlass, page 10).

According to the motion, the company had a backlog of approximately 13 subcontracts, with revenues in excess of $29 million, at the time of the bankruptcy filing. Some of the projects have been completed, leaving some “that have work to be performed and will be available for sale at the auction.” Among these is a $7.1 million project at Carnegie 57 in New York; a $3.9 million project at One World Trade Center; a $15.4 million on the Cablenet at One World Trade Center; a $3.8 million project at World Trade Center Tower 4; and a $685,000 project on the World Trade Center Path Hall Elevator.

Company officials said the only items not up for sale are its cash, pre-petition litigation claims, and claims under Chapter 5 of the bankruptcy code.

At press time, the court had not yet ruled on AAI’s motion.

construction news
Architecture Firms Cut Personnel by Almost a Third, Decline in Gross Revenue by 40 Percent
Architecture firms have had to cut a third of employees since 2008 as a result of receiving a 40-percent decline in revenue, according to a 2012 American Institute of Architects (AIA) Firm survey.

Although the nation rebounded from the recession in 2009, the firms’ gross revenue has held a 40-percent decline for the past three years. In 2008, architecture firms pulled in $44 billion but declined to $26 billion by 2011, according to the report. Construction spending levels also took a hit in 2011 and fell below $800 billion in comparison to 2008 when spending levels were $1 trillion.

Between 2007 and 2011, more than 28 percent of positions at architecture firms had been cut, thus taking away the 18 percent increase in architecture positions in the 2003-2007 period, according to the survey.

Dodge Momentum Index Falls in August
The Dodge Momentum Index fell 1.4 percent in August compared to July, according to the latest report from McGraw-Hill Construction, a division of The McGraw-Hill Companies. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The August Momentum Index came in at 96.8 (2000=100), down from July’s revised 98.1.

Still, McGraw-Hill reports that the index remains 21.4 percent ahead of its level a year earlier.

When looking at specific segments of the market, the commercial component of the index dropped 3.5 percent in August, while the institutional building segment rose 1 percent over the previous month.

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