Uncertainty and high risk are kryptonite to any investment community, and the healthcare real estate sector has seen a heavy dose of both since the beginning of the Great Recession.
From the economic crash of 2008-09, to the enactment of Obamacare in 2010, to the feds’ latest experiment—Ryancare, Republicare, Trumpcare, whatever you want to call it—no other major business sector has dealt with the level of chaos that healthcare owners, developers, providers, and consumers have faced.
Even as Speaker Paul Ryan’s Obamacare replacement died on the vine in Congress, President Trump and the GOP have no plans to walk away from their promise to repeal and replace the Affordable Care Act.
So, with a long road of political and financial uncertainty ahead for the healthcare sector, what does this mean for the nonresidential construction industry’s third-largest sector ($41 billion in annual construction spending)?
In the days and weeks following Trump’s historic victory, the consensus among healthcare sector analysts and AEC professionals was that the repeal and replace efforts would cause healthcare owners and developers to pump the brakes on major real estate construction and renovation plans in the pipeline. This, of course, was the case during the early days of the ACA, when many healthcare organizations halted construction projects until they could fully understand the implications of the law, especially the reimbursement structure.
More recent projections paint a slightly more positive picture for the healthcare construction market, at least in the near-term. In its latest healthcare real estate investment update, released last month (http://tinyurl.com/CBREhc17), CBRE Healthcare reported that healthcare providers “appear to be moving along with their strategy”—including their real estate plans—despite the turmoil in Washington, D.C.
“The ACA was a wake-up call for healthcare providers,” the report states. “In the last several years, healthcare providers have focused on ways to deliver care more efficiently and capture a greater market share to further their economies of scale. For developers, this means more outpatient facilities and a push to expand into new markets.”
Other real estate experts are not as upbeat. John Burns Real Estate Consulting, a respected housing market analyst based in Irvine, Calif., released a 68-page white paper last month (http://tinyurl.com/JBRChc17) that identifies healthcare as one of three major industries (the others being technology and automotive) that are “overheated and will likely be shedding jobs sometime soon.”
The most alarming indicator cited by JBRC: the sector’s rapid accumulation of debt—308% since 2009. This rate of growth far outpaces industry job and GDP growth, a circumstance that, historically, has triggered industry downturns.
Related Stories
| Feb 6, 2013
RSMeans cost comparisons: office buildings and medical offices
RSMeans' February 2013 Cost Comparison Report breaks down the average construction costs per square foot for four types of office buildings across 25 metro markets.
| Dec 9, 2012
AEC professionals cautiously optimistic about commercial construction in ’13
Most economists say the U.S. is slowly emerging from the Great Recession, a view that was confirmed to some extent by an exclusive survey of 498 BD+C subscribers whose views we sought on the commercial construction industry’s outlook on business prospects for 2013.
| Nov 11, 2012
Greenbuild 2012 Report: Healthcare
Green medical facilities extend beyond hospital walls
| Oct 24, 2012
Loma Linda University Medical Center lets light in with metal wall systems
Designers for the building aimed to create a positive environment for patients and visitors, and wanted to let in as much natural daylight as possible.
| Oct 11, 2012
Hank Adams Named to Lead HDR’s Healthcare Program
With more than 25 years of experience, HDR vice president is tapped to lead firm's healthcare projects.
| Oct 10, 2012
Skanska to Construct Children’s Hospital of Richmond at Virginia Commonwealth University Pavilion
Skanska USA announced that it has been awarded an $80 million contract to construct a new Children’s Pavilion at Children’s Hospital of Richmond at VCU.
| Oct 2, 2012
Bernards working on project at L.A. White Memorial Medical Center
The new facility is a $15-million, 41,000-sf concrete structure which includes three stories of medical office space atop a three-level parking garage.
| Sep 28, 2012
Seattle is home to first LEED-certified modular radiation center
By using modular construction and strategic site design, RAD Medical Systems built the first radiation center to receive LEED certification.
| Sep 20, 2012
Forrester begins construction of freestanding cancer center in Montgomery County, Md.
The new 51,000-square-foot building will include two linear accelerator vaults for radiation equipment.
| Sep 7, 2012
Healthcare architects get a preview of tomorrow’s medical landscape
The topic on everyone’s mind was how the Affordable Care Act would impact healthcare design and construction––and whether the law would even make it past the coming election cycle.
