Ready for somegoodnews? The AIA’s March 2009 Architecture Billings Index offered a soupçon of hope after months of force-fed misery. Apparently the decline in billings is slowing. Not that we’re seeing a recovery, mind you, but decline is slowing. And even more promising: Inquiries to firms about potential projects attained their highest score in more than a year (56.6; scores over 50 show positive growth).
Other nonresidential construction indicators aren’t so bullish, and if you’ve got the stomach, they’re worth some regular attention. Ivy Zelman, a notoriously gloomy analyst known in the housing industry as “Poison” Ivy, is predicting the worst nonresidential construction decline in modern U.S. history. The FMI Construction Outlook, First Quarter 2009, says “nonresidential construction will plummet and begin at least three years of contraction.” That’s an estimated 12 percent decline in 2009 and a 13 percent decline in 2010. Bottom? 2011. Recovery? 2012. Ouch.
I never thought I’d be hoping so hard to hit rock bottom. Why? Recovery typically follows. The rule of thumb about nonresidential construction is that it lags behind the larger economy by about 18 months. So after watching builders and bankers do backflips for two years, now the architecture profession gets to do a few of its own. Foreclosures aren’t just for McMansions anymore. The Hancock in Boston was sold in a March foreclosure auction for $660 million. The previous owners paid roughly double that amount for the 60-story tower in 2006. And General Growth Properties, the nation’s second-largest mall owner, filed for Chapter 11 bankruptcy protection in April.
According to FMI, the American Recovery and Reinvestment Act of 2009—aka the stimulus—isn’t going to inject enough adrenaline into the system to prevent a decline, though its $17 billion for building construction will help. FMI predicts a 7 percent drop in construction in 2009, but the number would have been 10 percent sans stimulus. More opportunity may come via the America’s Better Classrooms Act, a bill folded into the stimulus package to provide $25 billion for zero-interest school construction bonds.
The news may seem schizophrenic—doom-and-gloom here, cautiously optimistic there—but it’s essential to keep paying attention, no matter how painful it may be. Firms like the ones who’ve ranked in our inaugural Architect 50 (page 42) thrive in part because they absorb the most up-do-date information about the marketplaces they serve. Follow the data to find the dollars, my friends. On that path lies recovery.