Prospects dim in construction, economist says

Prospects are not good for an uptick in nonresidential construction activity in the Phoenix area before year's end, said American Institute of Architects Chief Economist Kermit Baker.

Baker compiles a leading indicator of future construction activity known as the Architecture Billings Index.

The idea is that before any construction project begins, an architect is hired to design the project.

When architects get busy, that means there are plenty of construction projects on the way. When architects have nothing to do, well, you get the idea.

Unfortunately, the Billings Index for July shows that the architectural industry is in a downward spiral that began about four months ago.

Early in the year, Baker said, architects were starting to see an increase in design projects coming through the door, but the boost in business was only temporary.

"This is an economy that's recovering in fits and starts," Baker said.

Based on the recent decrease in architectural-firm billings, Baker's organization was forced to downgrade its construction outlook for the year, from a prediction of zero growth in 2011 compared with the previous year to a predicted 5.6 percent decrease in activity compared with 2010.

There were a few bright spots where construction spending is expected to outperform the overall market, both in terms of specific industries and geographic areas, Baker said.

The health-care industry, for instance, is expected to finish the year with architecture billings up nearly 2 percent compared with 2010.

At the other end of the spectrum, the hospitality industry is expected to end the year with architecture billings down nearly 18 percent compared with 2010.

Regionally, Baker said the South and West are lagging behind the Northeast and Midwest when it comes to construction-related spending.

Among the states, Michigan has shown the most improvement in 2011, while Nevada and Rhode Island shared the bottom spot. Arizona was expected to do only slightly better than the last-place finishers.

by J. Craig Anderson The Arizona Republic Aug. 7, 2011 12:00 AM




Prospects dim in construction, economist says