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Developers have hit the brakes on their design and architecture spending.
The American Institute of Architects' monthly Architectural Billings Index, released Wednesday, showed the first decline in overall billings since January 2021. The index hit 47.7 in October, down from 54.3 the year prior — any score below 50 represents a contraction in billing activity.
“Economic headwinds have been steadily mounting, and finally led to weakening demand for new projects,” AIA Chief Economist Kermit Baker said in a press release. “Firm backlogs are healthy and will hopefully provide healthy levels of design activity against fewer new projects entering the pipeline should this weakness persist.”
The decline in design demand for new multifamily projects is lower than the national average, hitting 46.1 and 45.9, respectively, according to AIA. In the same month last year, AIA reported multifamily billing index at 55.8 and commercial/industrial billing at 57.4. Billing for those CRE asset classes fell for the first time in September since the post-pandemic recovery began, according to AIA.
The Federal Reserve’s aggressive interest rate hikes in recent months have caused a cloud on commercial asset valuations across the board and have made loans for new construction much more expensive, leading to a contraction in new development activity, including with multifamily and industrial.
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