Architecture Billings Index: Falls "precipitously"
Submitted by
CalculatedRisk on Fri, 10/31/2008 - 6:04am (39 comments)
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CR,
Do you expect that CRE will recover before RRE in this cycle given their relative levels of overcapacity?
First I hope
We should expect weaker non-residential structure investment in late 2008 and throughout 2009.
Don't forget darkness, locusts, hail,...
Yeah, last time I looked, most CRE projects need to be financied, very few of them are done for cash, and with no lending for nobody, the crane is soon to be an endangered species in the U.S. (and not the whooping crane either). Only hope of a near term revival will be a massive public works program.
Early enough to fit on the first elevator.
kahni, it depends on what "recover" means. I expect RRE to bottom first (as far as starts and new sales), but I think the RRE recovery will be sluggish because of all the inventory. CRE will not bottom until the end of '09 or later - it's too early to say - and the recovery for some segments (like malls and hotels) will be very sluggish.
Both segments are in for a tough time.
Best to all.
What is this obsession with falling off and diving off cliffs on this blog?
It actually sounds kind of fun.
OT,
From money.cnn.com on the failed merger of GM & Chrysler:
/snip
But that would also mean tens of thousands of jobs lost. Analysts have estimated that the total job loss in a GM-Chrysler merger could be as high as 90,000.
Furthermore, the Treasury is currently strapped with nearly $3 trillion in Federal bailout and credit liquidity programs aimed at stemming the recent financial crisis gripping the U.S. economy.
Thanks CR,
I was doing some systems type forecasting and was thinking that massive infrastructure and energy projects were going to be the only way out of the recession that we are in. So I thought that CRE might have a recovery much sooner than RRE.
I would have to agree that malls and hotels will be very sluggish though. There doesn't seem to be any way of that consumers will increase spending in the foreseeable future.
Always good to hear your thoughts.
Regards,
Kahni
I gather that auto represents what portion of the remaining 17% of exports?
And what's the multiplier effect for parts & suppliers and the multiplier on that multiplier...
I vote that these precipices become increasingly precipitous.
dere's a whole lotta precipitatin goin o
"fell precipitously"
They need stop using these terms. I mean I know it's Halloween and all, but that's gonna spook the sheeple.
Sheesh!
And these are the outer rain bands of a humongous shit storm. I need a new slicker. And a canoe. And a paddle.
Knurd!
Nostrovia,
Corpse,
That's why I wear spooky-vision glasses year-round. Not so frightening anymore.
The Ghost of bh
Volker the Viking,
When you're up shite creek, you don't get a paddle.
Nostrovia,
Corpse Misean is Dope writes:
Volker the Viking,
When you're up shite creek, you don't get a paddle.
no, but you've got hands. ick.
kahni,
I think you are right on government funded infrastructure projects being the only real way out of this.
I don't know whether this will cause CRE to recover faster than RRE.
During a major recession most likely there will be a shift towards savings as opposed to consumption. This kind of shift is probably going to be somewhat more long-lasting than the actual underlying recession. Hence I don't know whether all the CRE that has been built thus far will still be needed if people don't significantly increase consumption as a result of a recovery.
Assuming a growing population and stabilizing house prices I would think that RRE would recover before CRE.
I think you are right on government funded infrastructure projects being the only real way out of this.
They've got to start bailing out many of the existing Metro transportation projects first...
Furthermore, the Treasury is currently strapped with nearly $3 trillion in Federal bailout and credit liquidity programs
They are really asking for pocket change in comparison. We could bail out GM+C, Iceland, and Pakistan for less than this year's Wall Street bonuses.
The DOW & S&P hath no legs...
But I suspect we are all about to be knurd.
Here's a little more. enjoy:
Klatchian Coffee - Discworld & Pratchett Wiki
On Klatchian Coffee:
An extremely powerful coffee, will make the drinker knurd, and likely a powerful contributor to the philosophies and mathematical advances found among the peoples of the continent of Klatch.
It is believed that Achmed The Mad was drinking Klatchian Coffee when he wrote the Necrotelicomnicon.
Link to Necrotelicomnicon:
Necrotelicomnicon - Discworld & Pratchett Wiki
Given that RRE will recover (albeit weakly) before CRE, is there an "index" that relates to residential architectural activity that is available? Something that would be a precursor to housing starts? I couldn't find anything like it on the AIA site.
Ponyless in NJ,
"I think you are right on government funded infrastructure projects being the only real way out of this."
Oh yeah...let's just go f*cking Japanese and build bridges to nowhere.
Totally useless infrastructure projects, great idea.
We could also have people dig holes for 4hrs a day, and fill them backup in the last 4.
Or take heaping piles of money and burn it, like the Joker.
Or give it to insolvent banks like GM...erm...oh we're doing this one already.
Nostrovia,
Ponyless in NJ,
Typically, I would agree with your sentiment that RRE would recover before CRE, but the bubble in RRE looks to have dwarfed the one in CRE by a significant amount as CR has shown through his investment comparison posts.
So, I was trying to see if there was a way of determine if the level of "bubbleness" could be used as a relative predictor of recovery, especially given the dynamics of the recovery.
After all, as CR has pointed out many times, RRE usually recovers first and is a good leading indicator. I believe that it will not be a good leading indicator for this recovery and have been trying to figure out what might be.
Regards,
Kahni
Federal Funds Chart
Daily effective rate = 0.30
Like the subject two threads and 10 minutes ago (!) architectural billings this time are far more leading than in the past. From proposal to approval is getting much much longer and far more expensive as arrogant urban planners encumbered private developments with their socialist dreams of shaping the built environment.
Misean,
I was thinking about transmission grid improvements and basic maintenance for our existing infrastructure. Those are funded directly or indirectly through taxes. I was also thinking that given a long term view of energy costs increasing, different types of traveling infrastructure would be needed, i.e. more trains, buses, etc.
Definitely, bridges to nowhere aren't useful, but a low energy intensity modern railway system should be, yeah?
Regards,
Kahni
Bond Girl,
Well thanks for scaring the S out of me on Halloween morn.
The Ghost of bh,
How do you find this stuff. ROFL.
Nostrovia,
kahni,
If you expect the politicians in this country to do anything infrastructure that isn't blatantly stoopid, you got another thing coming.
The LA transit authority built a friggin' subway in LA. In FREAKING LA!
Cost more than like a gazillion dollars. A tunnelling machine got off course, and as far as anyone knows is still burrowing it's way to the center of the earth, and now they want to extend it to Santa Monica.
That's gov't infrastructure for ya!
Knurd!
Nostrovia,
Misean,
I am not quite a pessimistic as you are (although I am called a doomster at work). My basic thinking is that America will try to do something, and that something pretty much has to be massive infrastructure projects like was done in the GD. I also believe that there will be an increased drive for "energy independence", whatever that means, and that will entail energy infrastructure spending.
Having worked with governments for 10 years now, I know that they are woefully slow and inefficient, but spending in these fields is at least in the right direction... better than housing at least. And if America doesn't make these investments, I don't think America will ever recover from the twin shocks of sustained energy costs increases and debt deleveraging.
I have read your comments here with interest and respect for about 2 years now, I would be interested in hearing what you think of my rudimentary forecast.
Regards,
Kahni
An owner of a construction management firm I know commented to me yesterday that new business has pretty much dried up. This is from a guy who does a lot of work for private schools, healthcare, and life sciences, sectors that traditionally aren't as sensitive to economic cycles.
SpeciousRiches
Specious--what state are you in?
Misean,
Maybe there is a coastal issue here. NJ Transit and NYC Transit work well.
Yes infrastructure is expensive and there will be lots of government waste. That government waste can stimulate the economy until the private sector recovery starts to grind itself out of a recession/depression on the coattails of all the government spending.
I've never understood this desire to have GM go bankrupt. Its a large industrial company. One of the few left that actually produces things in this country. This is the way out of this mess -- to produce more and consume less. To have more people in industry and less in bullshit services.
picture pages
picture pages
lots of fun with picture pages
lots of fun with crayons and with pencils...
CR,
Would you please post a link to the chart? I could not find it on the Architect site.
Thanks
Good friend was hired by an architectural firm 18 months ago because of her expertise in educational buildings - one of the most robust growth areas for architectural firms during the past few years. She was laid off in late August, not enough edu projects coming in. All sorts of formerly stable ("its all contained") areas are going wobbly. And this is in Texas.
"We should expect weaker non-residential structure investment in late 2008 and throughout 2009."
Concrete is not gold (even if it is high-performance concrete).
Yo!
Nostrovia, why don't you STFU! Really, your comments sound like they are coming from a drunk, Republican acolyte of Mr. Greenspan. Or perhaps the offices of Goldman Sachs. Full of bombast but...
Signifying nothing.
There are plenty of good, solid, needed infrastructure projects on the boards which would provide jobs and, in the end, the impetus for economic growth.
What was the average annual growth rate under FDR?
LBJ?
Clinton?
I would be willing to wager you have no idea nor do you understand the connection between those President's tax policies, their public works and the public welfare.
Of course to such as you the words 'public welfare' are more or less meaningless.
Right?
.
Turns out we don't need another glass-walled stack of kleptocrats. At least for a while, anyway.
Architects: use this time wisely. Study ramparts and moats.