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
| Dec 30, 2014
The future of healthcare facilities: new products, changing delivery models, and strategic relationships
Healthcare continues to shift toward Madison Avenue and Silicon Valley as it revamps business practices to focus on consumerism and efficiency, writes CBRE Healthcare's Patrick Duke.
| Dec 29, 2014
HDR and Hill International to turn three floors of a jail into a modern, secure healthcare center [BD+C's 2014 Great Solutions Report]
By bringing healthcare services in house, Dallas County Jail will greatly minimize the security risk and added cost of transferring ill or injured prisoners to a nearby hospital. The project was named a 2014 Great Solution by the editors of Building Design+Construction.
| Dec 29, 2014
New mobile unit takes the worry out of equipment sterilization during healthcare construction [BD+C's 2014 Great Solutions Report]
Infection control, a constant worry for hospital administrators and clinical staffs, is heightened when the hospital is undergoing a major construction project. Mobile Sterilization Solutions, a mobile sterile-processing department, is designed to simplify the task. The technology was named a 2014 Great Solution by the editors of Building Design+Construction.
| Dec 29, 2014
HealthSpot station merges personalized healthcare with videoconferencing [BD+C's 2014 Great Solutions Report]
The HealthSpot station is an 8x5-foot, ADA-compliant mobile kiosk that lets patients access a network of board-certified physicians through interactive videoconferencing and medical devices. It was named a 2014 Great Solution by the editors of Building Design+Construction.
BIM and Information Technology | Dec 28, 2014
The Big Data revolution: How data-driven design is transforming project planning
There are literally hundreds of applications for deep analytics in planning and design projects, not to mention the many benefits for construction teams, building owners, and facility managers. We profile some early successful applications.
| Dec 28, 2014
AIA course: Enhancing interior comfort while improving overall building efficacy
Providing more comfortable conditions to building occupants has become a top priority in today’s interior designs. This course is worth 1.0 AIA LU/HSW.
| Dec 2, 2014
Nonresidential construction spending rebounds in October
This month's increase in nonresidential construction spending is far more consistent with the anecdotal information floating around the industry, says ABC's Chief Economist Anirban Basu.
| Dec 1, 2014
How public-private partnerships can help with public building projects
Minimizing lifecycle costs and transferring risk to the private sector are among the benefits to applying the P3 project delivery model on public building projects, according to experts from Skanska USA.
| Nov 25, 2014
Emerging design and operation strategies for the ambulatory team in transition
As healthcare systems shift their care models to be more responsive to patient-centered care, ambulatory care teams need to be positioned to operate efficiently in their everyday work environments, write CannonDesign Health Practice leaders Tonia Burnette and Mike Pukszta.
| Nov 20, 2014
Lean Led Design: How Building Teams can cut costs, reduce waste in healthcare construction projects
Healthcare organizations are under extreme pressure to reduce costs, writes CBRE Healthcare's Lora Schwartz. Tools like Lean Led Design are helping them cope.