Proposal activity for healthcare design and construction projects sank to its lowest level in over three years in the third quarter of 2023, according to PSMJ Resources’ Quarterly Market Forecast of architecture, engineering and construction companies. Excluding the pandemic year of 2020, this was the healthcare market’s worst quarterly result in more than 10 years.
Rising capital costs and supply chain disruptions caused delays in several major U.S. healthcare projects this spring and summer. Some healthcare leaders also expressed reluctance to commit resources to a large building project when the specter of another COVID surge could force hospitals to redeploy resources to address it.
The good news is that few projects are being canceled entirely, and the long-term prognosis is good. “The healthcare market is going through a rough patch right now due to inflation and other disruptions, but its overall outlook remains strong,” says PSMJ President Greg Hart. “Once some of the economic and societal uncertainty is resolved, the combination of demographics, aging facilities and the need to accommodate new technologies and treatment practices will drive a resurgence.”
Asked whether proposal activity increased, decreased or stayed about the same in the third quarter when compared with the prior quarter, 39.2% of survey respondents said they saw higher activity, while 9.8% reported a decrease (with the remaining 51.0% seeing no major difference). This equates to a net plus/minus index of 29.4%, down from 38.2% in the second quarter and 40.6% in the first quarter.
PSMJ’s NPMI is the delta between the percentage of respondents reporting an increase and those reporting a decrease in proposal activity, quarter over quarter. PSMJ has been using its propriety NPMI as a measure of the early-stage metric of proposal activity in its forecast since 2003.
Proposal activity in the four healthcare submarkets – hospitals, medical office buildings, laboratories and continuing care facilities – were also down from the prior quarter. The NPMI for hospitals slid from 25 to 20, MOBs fell from 31.6 to 30 and labs dropped from 22.7 to 16.7. Continuing care facilities, which had the best results among the four healthcare submarkets, also declined – from 49.0 to 42.2.
Learn more at psmj.com/surveys/quarterly-market-forecast-2.
