New architects’ report shows how the trade war is hitting commercial real estate

Real Estate

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A key indicator for the commercial real estate market is showing signs of weakness, and uncertainty in the economy over the trade war, markets and interest rates may be to blame.

The American Institute of Architects’ architecture billings improved slightly, though barely in positive territory, as demand for design services in July rose slightly. Design contracts, however, fell into negative territory for the first time in almost a year. Architecture billings also softened in all regions except the West and in all specializations except multifamily.

“The data is not the same as what we saw leading up to the last economic downturn but the continued, slowing across the board will undoubtedly impact architecture firms and the broader construction industry in the coming months,” said the AIA’s chief economist, Kermit Baker. “A growing number of architecture firms are reporting that the ongoing volatility in the trade situation, the stock market, and interest rates are causing some of their clients to proceed more cautiously on current projects.”

Architecture billings are strongest in the multifamily sector, as demand for rental apartments remains high amid weak affordability in the for-sale housing market. All other sectors are in negative territory.

“If people are nervous about the growth outlook, low interest rates become a secondary consideration in spending and business decisions,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group and a CNBC contributor.

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