Real Estate

What this number tells us about commercial real estate in 12 months

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New demand for projects like healthcare and education facilities, as well as public safety and government buildings drove an index of architecture billings to its highest level in eight years. The American Institute of Architects (AIA) reported a nearly four point jump in its architectural billings index (ABI) in June to 55.7. Any score above 50 reflects an increase in billings.

The ABI is an economic indicator of future commercial real estate construction nine to twelve months from now. Another index of new project inquiries also moved higher.

"The June numbers are likely showing some catch-up from slow growth earlier this year. This is the first month in 2015 that all regions are reporting positive business condition," said AIA Chief Economist Kermit Baker.

The only area showing weakness, surprisingly, was the multi-family apartment housing sector. Multi-family construction has been very strong in the past few years, as supply is still relatively low, and demand is quite strong. Multi-family housing starts jumped nearly 29 percent in June from May and were up 55 percent from a year ago, according to the U.S. Census. This as single family home construction remains considerably weaker.

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"The demand for new apartments and condominiums may have crested, with index scores going down each month this year and reaching the lowest point since 2011," said Baker.

Regionally, the ABI was strongest in the Midwest and weakest in the Northeast, but all parts of the country were in positive territory.