A surge in architecture billings predicts strong growth for U.S. Commercial Real Estate development in 2016, a new index says.
The Architecture Billings Index (ABI), which is compiled by the American Institute of Architects (AIA), increased from 49.1 in August to 53.7 in September after experiencing a small drop the month before. The index has expanded in six of the past nine months of 2015.
The ABI, which is a key indicator for U.S. Commercial Real Estate construction, presents a picture of billable design work roughly nine to 12 months before funds are actually spent on construction.
Another index, the new projects inquiry index, decreased somewhat from 61.8 in August to 61 in September.
The regional ABI remained the weakest in the Northeast at 43.7, while the most robust expansion was experienced in the South and the Midwest, standing at 54.5 and 54.2, respectively. The ABI for the West region was 51.7 in September.
Almost every market and every commercial property type saw increasing construction deliveries and starts in 2015, lately in the retail real estate sector. The optimistic ABI index is a strong indicator that this hastening pace of development will continue well into 2016.
Fitch Rating also issued a report in October showing that the first eight months of 2015 experienced robust activity for U.S. private nonresidential construction, with the rate of construction spending anticipated to continue strongly through 2016.
From January through August, private nonresidential construction spending jumped 12.1% in over the same period a year prior. That achievement came on the heels of an 11.3% improvement in 2014.
Manufacturing, office and lodging properties saw the healthiest levels of construction spending. Fitch predicts the sector will increase by 8.5% in 2015 and 7% in 2016. Public construction spending for projects such as highway and street construction also grew in 2015, up 5.8% during the first eight months of the year.
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