Leading Indicators Finish 2017 Up
Two leading indicators of future construction spending finished 2017 on positive notes.
Both Dodge Data and Analytics’ Dodge Momentum Index and the American Institute of Architects’ Architecture Billings Index finished the year in positive terrain.
The Dodge Momentum Index grew 3.6 percent in December to 153.9 from its 148.6 revised November reading. The index tracks nonresidential building projects in the planning stage, which generally leads construction spending for buildings by one year.
After slipping during the third quarter, the Dodge Momentum Index returned to its upward path in the fourth quarter, enabling December’s Momentum Index reading to be up 20.9 percent compared to one year ago. “The continued strengthening by the Momentum Index in 2017 suggests that nonresidential building construction activity will advance further during 2018,” Dodge said.
The Architecture Billings Index also remained in positive territory, finishing December with a 52.9 reading. Any score above 50 indicates increased demand for commercial real estate design services, which typically lead actual construction spending by nine to 12 months.
December’s positive reading represented the third straight month of design billing growth, said AIA Chief Economist Kermit Baker, noting ABI scores grew in 10 of 12 months last year. “Additionally, the overall strength of the fourth quarter lays a good foundation for healthy growth in construction activity in 2018,” he said.
Dodge Data and Analytics said demand for institutional properties such as hospitals caused most of the Momentum Index’s December increase by jumping 8.6 percent. The commercial real estate component grew just 0.7 percent. For the full year 2017, the Momentum Index averaged 132.3, up 10.7 percent from 2016’s full-year average , with similar improvement for the commercial sector (up 11.4 percent) and the institutional sector (up 9.7 percent).
The largest commercial real estate projects in the planning stage in December included a $100 million hotel on Harvard University’s Allston, Mass. campus and a $100 million office building in Little Rock, Ark.
