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
Healthcare Facilities | Aug 9, 2016
Key strategies to reduce healthcare facility costs and maintain operations
The right approach during the planning, design, and construction of a new facility can yield a positive return on investment and lower the overall cost basis for ongoing operations, writes Steve Higgs, Senior Managing Director with CBRE Healthcare.
| Aug 8, 2016
HEALTHCARE GIANTS: Age-simulation technology aids design for the mobility impaired
As the 65+ population continues to rise, the AEC industry needs to better understand the stresses and anxieties those who are mobility impaired face when navigating spaces like medical facilities.
| Aug 8, 2016
Top 80 Healthcare Engineering Firms
AECOM, Jacobs, and WSP | Parsons Brinckerhoff top Building Design+Construction’s annual ranking of the nation’s largest healthcare building sector engineering and E/A firms, as reported in the 2016 Giants 300 Report.
| Aug 8, 2016
Top 100 Healthcare Construction Firms
Turner Construction Co., McCarthy Holdings, and Skanska USA top Building Design+Construction’s annual ranking of the nation’s largest healthcare building sector construction and construction management firms, as reported in the 2016 Giants 300 Report.
| Aug 8, 2016
Top 90 Healthcare Architecture Firms
HDR, Stantec, and Perkins+Will top Building Design+Construction’s annual ranking of the nation’s largest healthcare building sector architecture and A/E firms, as reported in the 2016 Giants 300 Report.
Healthcare Facilities | Jul 25, 2016
AIA selects seven winners of healthcare building design award
The National Healthcare Design Awards recognizes functional hospital projects that solve aesthetic, civic, urban, and social concerns. Recipients were selected in three categories this year.
Architects | Jul 22, 2016
5 creative approaches to finish standards
With the right mindset, standards can produce great design for healthcare facilities, as VOA's Candace Small explores.
Healthcare Facilities | Jul 20, 2016
Process mapping simplifies healthcare design
Charting procedures and highlighting improvement opportunities can lead to developing effective design strategy simulations. GS&P’s Ray Wong writes that process mapping adds value to a project and bolsters team and stakeholder collaboration.
Sponsored | Building Technology | Jul 11, 2016
3D scanning technology solves University of Iowa Children’s Hospital’s curved wall curveball
Gilbane Building Company utilized advanced 3D scanning technology as part of a virtual design and construction (VDC) solution to ensure quality control throughout the lifespan of the project
Healthcare Facilities | Jul 7, 2016
How to navigate the tedious regulatory approval process in healthcare construction
Compliance processes can be handled efficiently with a little bit of foresight. CBRE's Patrick Duke, Kyle Marden, and David Vollmer evaluate the regulations and permits that may be required and the process for incorporating approvals into projects.