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 | Jul 1, 2016
AIA releases summary of the 2016 Design and Health Research Consortium
Consortium members discussed how architects, designers, and health professionals can best apply design and health research in their communities.
Healthcare Facilities | Jun 19, 2016
Rapid growth of retail health clinics presents new choices for consumers, payers, and providers
Service expansions help dealers boost clinics’ profitability.
Healthcare Facilities | Jun 10, 2016
Top 10 health technology hazards include some influenced by space design
ECRI Institute’s annual list includes operational and workflow issues.
Healthcare Facilities | May 30, 2016
CBRE finds that investors are still flocking to healthcare sector
Over the past year, healthcare accounted for nearly one-fifth of all new jobs in the U.S.
Big Data | May 27, 2016
Analytics alone won't save money for healthcare facility owners
Advanced technology provides insight into the actions necessary to cut costs, but it's the people, processes, and implementation that make a difference with analytics, writes CBRE's Paul Oswald.
Hospital Design Trends | May 19, 2016
CannonDesign releases new white paper on advancements in operating room environments
"Surgical Suites: Emerging Approaches to Planning and Design" offers solutions for collaboration and technology integration.
Healthcare Facilities | May 6, 2016
Infographic: The greening of healthcare
By adopting green building and sustainable practices, healthcare facilities can save $15 billion over 10 years. Skanska's infographic spells it all out.
Healthcare Facilities | Apr 29, 2016
How improving emergency department design leads to greater hospital efficiency
Efficient ED operations result in shorter wait times, quicker diagnosis and care plans, maximum utilization of high-cost human and physical resources, and overall better patient experiences and patient satisfaction scores, writes CBRE Healthcare's Curtis Skolnick.
Healthcare Facilities | Apr 24, 2016
A symposium in New Jersey examines how a consolidating healthcare industry can better manage its excess real estate
As service providers position themselves closer to their communities, they are looking for ways to redirect non-core buildings and land for other purposes.
Senior Living Design | Apr 14, 2016
Creating a home for eldercare using the ‘Green House’ design concept
VOA Associates’ Douglas King offers design considerations in implementing the Green House concept in eldercare for continuing care retirement communities.