Despite a challenging economic environment, proposal activity for healthcare projects remains relatively steady, according to the latest Quarterly Market Forecast from PSMJ Resources. The overall healthcare market posted a Net Plus/Minus Index of 37 in the first quarter of 2025 —a decline from both fourth quarter 2024 (50) and first quarter 2024 (45).
While this marks the second consecutive quarter of decline and the lowest index score since 2023, the numbers suggest demand for healthcare-related facilities continues to hold up better than in many other sectors. Among the 12 major markets assessed in the PSMJ survey, healthcare’s NPMI was third highest behind heavy industry and energy/utilities.
“Across the board, the healthcare market remains on relatively strong footing in the AEC space,” said PSMJ President Gregory Hart. “Compared with his first term, President Trump hasn’t devoted much attention to healthcare reform in his campaign or in the early part of his term. As such, the underlying factors of an aging population and a diversification away from the traditional hospital environment will continue to drive this market.”
PSMJ’s proprietary NPMI measures the difference between the percentage of AEC leaders reporting increased proposal opportunities in a market or submarket and those reporting a decline. A positive NPMI indicates a net increase in proposal volume.
Submarkets reflect mixed trends
Each of the four healthcare submarkets tracked by PSMJ experienced quarter-over-quarter and year-over-year declines — except one.
- Hospitals: After a dramatic surge in third quarter 2024 (NPMI 69), the hospitals submarket has cooled considerably, falling to 31.5 in first quarter 2025. That’s down from 49 in fourth 2024 and slightly above the 29 reading from first quarter 2024. The earlier spike in proposal activity may have been driven by pent-up demand and capital finally moving off the sidelines. With this wave now easing, the sector appears to be normalizing — albeit at a healthy level.
- Continuing care facilities: CCFs fell to 41 in first quarter 2025, down from 43 in fourth quarter 2024 and 47 in first quarter 2024. Though still one of the stronger-performing submarkets, the downward trend may signal mounting pressure from development costs and labor shortages. Nonetheless, long-term demographics continue to favor growth in eldercare infrastructure.
- Medical office buildings: MOBs saw an NPMI fall to 23 in first quarter 2025, from 30 in fourth quarter 2024 and 52 in first quarter 2024. The shift of healthcare services toward outpatient settings continues, but this segment may be feeling the squeeze of rising interest rates and cautious investor sentiment, particularly in suburban markets.
- Medical laboratories: Medical labs posted a first quarter 2025 NPMI of 11, down from 26 in fourth quarter 2024 and 18 in first quarter 2024. The decline suggests that after a period of heightened demand for diagnostic and research facilities, proposal activity has cooled significantly. While long-term investment in biotech, genomic testing and precision medicine remains promising, market volatility and funding constraints may be tempering short-term growth in this submarket.
Looking ahead
The long-term growth drivers in healthcare — population aging, chronic illness management, outpatient service delivery and technology integration — remain intact. As such, even amid declining NPMI readings, the sector continues to outperform many other non-residential markets. While a far cry from the explosive growth periods of prior years, the current numbers show healthcare design and construction remain an area of opportunity — even during times of turbulence.
Article provided by Jerry Guerra, The JAGG Group, on behalf of PSMJ Resources. For more details, visit https://www.psmj.com/surveys/quarterly-market-forecast-2.
