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
| May 11, 2014
Final call for entries: 2014 Giants 300 survey
BD+C's 2014 Giants 300 survey forms are due Wednesday, May 21. Survey results will be published in our July 2014 issue. The annual Giants 300 Report ranks the top AEC firms in commercial construction, by revenue.
| May 7, 2014
Design competition: $900,000 on the line in Las Vegas revitalization challenge
Las Vegas Mayor Carolyn Goodman wants your economic development ideas for remaking four areas within the city, including the Cashman Center and the Las Vegas Medical District.
| May 3, 2014
Health system capital planning for the future: The benefits of master plan portfolio analysis and ambulatory market modeling
Money continues to be scarce, yet U.S. health systems need to invest and re-invest in their physical future. Healthcare facilities planning experts from CBRE Healthcare outline tools and strategies for identifying where to best allocate precious resources.
| May 1, 2014
Super BIM: 7 award-winning BIM/VDC-driven projects
Thom Mayne's Perot Museum of Nature and Science and Anaheim's new intermodal center are among the 2014 AIA TAP BIM Award winners.
| Apr 29, 2014
USGBC launches real-time green building data dashboard
The online data visualization resource highlights green building data for each state and Washington, D.C.
| Apr 16, 2014
Upgrading windows: repair, refurbish, or retrofit [AIA course]
Building Teams must focus on a number of key decisions in order to arrive at the optimal solution: repair the windows in place, remove and refurbish them, or opt for full replacement.
| Apr 9, 2014
How patient-centered medical homes can help healthcare providers and patients
Beyond reducing the number of uninsured Americans, the Affordable Care Act is driving new types of healthcare facilities, especially patient-centered medical homes.
| Apr 9, 2014
Steel decks: 11 tips for their proper use | BD+C
Building Teams have been using steel decks with proven success for 75 years. Building Design+Construction consulted with technical experts from the Steel Deck Institute and the deck manufacturing industry for their advice on how best to use steel decking.
| Apr 2, 2014
The new model of healthcare facility management
A growing number of healthcare organizations are moving to an integrated real estate model in an effort to better manage costs, respond to regulatory requirements, and support changes in patient care delivery.
| Apr 2, 2014
8 tips for avoiding thermal bridges in window applications
Aligning thermal breaks and applying air barriers are among the top design and installation tricks recommended by building enclosure experts.
