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
| Jul 25, 2012
Hill International selected as project manager for two Abu Dhabi hospitals
The two hospitals have a combined estimated project value of approximately AED 784 million ($213 million).
| Jul 20, 2012
2012 Giants 300 Special Report
Ranking the leading firms in Architecture, Engineering, and Construction.
| Jul 20, 2012
3 important trends in hospital design that Healthcare Giants are watching closely
BD+C’s Giants 300 reveals top AEC firms in the healthcare sector.
| Jul 19, 2012
Construction begins on military centers to treat TBI and PTS
First two of several centers to be built in Fort Belvoir, Va. and Camp Lejeune, N.C.
| Jul 12, 2012
Cardoso joins Margulies Perruzzi Architects
Senior architect brings experience, leadership to firm’s healthcare practice.
| Jul 11, 2012
HOK honored with Los Angeles architectural award
42nd annual awards from the Los Angeles Business Council honor design excellence.
| Jun 29, 2012
SOM writes a new chapter at Cincinnati’s The Christ Hospital
The 332,000–sf design draws on the predominantly red brick character of The Christ Hospital’s existing buildings, interpreting it in a fresh and contemporary manner that fits well within the historic Mt. Auburn neighborhood while reflecting the institution’s dedication to experience, efficiency, flexibility, innovation and brand.
| Jun 20, 2012
WHR’s Tradewell Fellowship Marks 15th Anniversary
Fellowship program marks milestone with announcement of new program curator and 2012 fellow
| Jun 8, 2012
Thornton Tomasetti/Fore Solutions provides consulting for renovation at Tufts School of Dental Medicine
Project receives LEED Gold certification.
| Jun 6, 2012
KLMK Group awarded contract with Parkland Health & Hospital System in Texas
KLMK will also provide planning guidance in all aspects of the project related to facility activation.