Real estate busts tend to be particularly troublesome for architects. Developers’ plans for new buildings are among the first to be tossed aside when money runs short. With the unending drought of new work clearly in mind, the profession’s leading trade organization is looking to alleviate some pain, reports the Wall Street Journal.
The American Institute of Architects is crafting a database that would catalog stalled development projects around the country, eyeing as an audience lenders and equity investors who might be on the hunt for deals. While the plan is without much detail at this point — the group announced the effort last week as part of the Clinton Global Initiative’s CGI America conference — the organization aims to put together the database of stalled projects by the end of the year that would rank or give preference to viability.
Architects saw massive layoffs back in 2008 and 2009, and at least thus far this cycle, the market has been slow to require their services once again. Even as commercial real estate prices boom in some major markets (New York City; San Francisco; Washington, D.C.), lenders are reticent to finance a new construction project given that the failure of many a condo tower nearly brought them to their knees within the past three years.
In short, that means there’s not much architectural work to go around: The Architectural Billings Index fell below 50% in both April and May, indicating a decline in the amount of work on architects’ books nationwide. That came only after the index registered modest increases in the amount of work at the end of 2010 and the start of 2011.
One of the concepts behind the planned database is that there is a mismatch between stalled projects that make some economic sense and the billions of real estate investment dollars on the sidelines.
“There just seemed to be a lot of stories about how projects that seemed like they made a lot of economic sense just couldn’t get financing,” said Kermit Baker, chief economist for the AIA.
Of course, it remains to be seen whether more transparency and information about stalled projects will provide the necessary spark to get cranes moving again. Much of the reticence to lend for construction projects, after all, has less to do with a project’s merits than with banks simply not wanting to take large risks in the sector.
Mr. Baker said he expects the catalog of projects would be large—likely with several hundred projects on it. Read More.