Economist Ken Simonson expected the hospital construction market to experience a significant rebound in 2012. Instead, the construction starts are expected to slip 16% to 63 million sq ft, and the dollar value of starts could drop 12% to $20 billion, according to the McGraw-Hill Construction forecast.
“I’ve been quite disappointed,” says Simonson, chief economist with the Associated General Contractors of America in Arlington, Va. “I’m puzzled as to why we didn’t see more of a pickup in health care construction.”
When the stock market began to rebound, Simonson expected private hospitals to resume their plans for construction due to favorable financial conditions. With their renewed ability to secure bonds at low interest rates, he predicted that hospitals would plan to catch up with their significant backlog of modernization and expansion. Instead, both hospital and clinic construction saw sharp drops in spending due to an increase in hospital mergers, cuts in federal spending, and an “uncharacteristically low” number of groundbreakings for major health care construction projects.
Economic uncertainty may also be to blame for the deferment in capital expansion plans, according to the Dodge forecast. Now that the uncertainty surrounding the presidential election and health care reform has dissipated, however, the health care industry may start to show an increase in spending, but it won’t be a rapid or dramatic pickup, Simonson says.
Dodge also forecasts that the weakness in health care facilities will be short-lived, and starts should rebound 2% in 2013 to 64 million sq ft. Most spending will likely be focused on renovations, due to the number of aging facilities coupled with the growing elderly population’s demand for state-of-the-art technology, amenities, and services.
While other electrical contractors may not experience relief until next year, Pyramid Electrical Contractors in Fairview Heights, Ill., has already enjoyed a surge in health care work. In fact, health care now accounts for 28% of its business after increasing 10% in one year. With both the commercial and industrial sector down, the health care market is the only growing segment of Pyramid’s business.
“Health care is the fastest growing segment of our company,” says Ken Keeney, CEO. “I think it can be attributed
to the graying of America and that health care is the No. 1 spending item for Americans once they reach retirement.”
The technology in the medical field is changing at lightning speed, Keeney says, which is driving renovation projects throughout Illinois. The contractor is currently working on several projects at Gateway Regional Medical Center, including power requirements for X-ray and MRI renovations, preventive maintenance work, a motor control replacement, ADA upgrades, and power distribution for a 100% redundant emergency power system.
In addition, the company has partnered with Memorial Hospital in Belleville, Ill., on an assisted-living project and the build-out of a medical office building. Pyramid also installed the wiring for the emergency power distribution system and renovated patient floors at Touchette Regional Hospital in Centreville, Ill. Currently, its electricians are also installing the wiring for voice/data, fire alarms, nurse call, and access control systems at St. Francis Hospital in Lichfield, Ill.
While the health care construction market slipped in 2011 and 2012, electrical contractors nationwide could gain more opportunities in 2013 as hospitals strive to meet patients’ needs. “The health care industry is changing so quickly that hospitals are trying to remain competitive and improve service in any way they can,” Keeney says.
Fischbach is a freelance writer based in Overland Park, Kan. She can be reached at [email protected].