March 13, 2006
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The American Institute of Architects (AIA) reported that billings at U.S. architecture firms were positive every month in 2005 for the first time since 2000, pointing towards 2006 being the best year for nonresidential construction in six years. With construction accounting for 9% of GDP, increased nonresidential activity will ease the effects of a projected slowdown in the residential market, according to the report. The Architecture Billings Index (ABI), a leading economic indicator of nonresidential construction activity, had a rating of 50.4 in December 2005 (any score above 50 indicates a positive score), compared to 58.4 for November 2005 and 47.8 for December 2004.

“The nonresidential upturn should continue into 2007 and can be attributed to pent-up demand for new projects that weren't able to be undertaken in recent years,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA.

All major nonresidential sectors to benefit from improved business conditions, according to the report, and the significant upturn in demand for office space and hotel facilities will drive the commercial market. Educational and healthcare projects are also expected to see substantial growth this year, fueling the institutional sector. Additionally, post-hurricane rebuilding is projected to accelerate in mid-2006 and continue for several years.

“We believe the AIA's forecast for accelerating growth in nonresidential construction activity in 2006 bodes well for construction-related companies,” said Robert W. Baird & Co., a senior industrial analyst at Michael A. Schneider, CFA. “Indeed, the bullish outlook is consistent with indications of strengthening demand from the construction services companies in our coverage universe. Furthermore, our contacts concur that the rebuilding process in the aftermath of recent hurricanes should enhance the nascent construction cycle.”

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