Architecture firms reported a sharp drop in business in September, indicating that the commercial real estate market could see more pain soon.
Commercial real estate has been hit with a double whammy: Return to office is slow, and interest rates are high.Architecture firms reported a sharp drop in business in September, indicating that the commercial real estate market could see even more pain in the next year.dropped to 44.8 in September, the lowest score since December 2020, during the height of the pandemic. Any score below 50 indicates worsening business conditions.
The index is a forward-looking indicator of demand for non-residential construction activity, both commercial and industrial buildings. It aims to predict construction activity nine to 12 months out. "While more firms are reporting a decrease in billings, the report also shows the hesitance among clients to commit to new projects with a slump in newly signed design contracts," said Kermit Baker, AIA's chief economist. "As a result, backlogs at architecture firms fell to 6.5 months on average in the third quarter, their lowest level since the fourth quarter of 2021."is slow, hitting both office buildings as well as the retail and restaurants that support them.
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