Healthcare design and construction proposal activity receded from its near-record level in the second quarter of 2022, but remained at a reasonably solid rate in the third quarter, according to PSMJ Resources’ Quarterly Market Forecast survey of architecture, engineering and construction firms. In a quarter in which all 12 major markets saw a slowdown in proposal activity, the healthcare market was the fourth strongest behind water/wastewater, transportation and energy/utilities.
“High demand for healthcare services driven by the aging population and improvements in treatments and technology help to keep the healthcare market consistently active,” says Greg Hart, senior consultant and QMF survey manager for PSMJ. “Since we started the survey in 2003, healthcare has probably been the market that has shown the most consistency, quarter after quarter.”
Healthcare isn’t unaffected by economic uncertainty, however, as rising interest rates, lingering supply chain issues and higher costs for materials and labor have caused proposal activity to ease. The net plus/minus index that PSMJ uses to gauge proposal activity was 60 for healthcare in the second quarter, with 65.5% of respondents saying they saw growth in proposal activity compared with only 5.5% who saw a decline, quarter over quarter. For the third quarter, the healthcare NPMI was 38.6, with 47.7% reporting growth and 9.1% seeing a drop. (PSMJ’s NPMI is the delta between the percentage of respondents reporting an increase and those reporting a decrease in proposal activity for the quarter).
Among the four healthcare submarkets assessed, medical office buildings was the runaway leader; its NPMI of 48.7 was 11th best among the 58 submarkets measured in the QMF.
“One trend that we’re hearing from our members in some geographic markets is the conversion of underutilized office space into MOBs,” notes Hart. “With the availability of money and properties both tight, rather than doing a ground-up structure, some clients are looking to convert conventional office buildings into medical use.”
Continuing care facilities (NPMI of 33.3), medical labs (28.6) and hospitals (23.7) recorded moderate levels of proposal opportunities in the third quarter, though activity slowed markedly for all four healthcare submarkets. Despite the deceleration, design and construction firms working in the healthcare market are unlikely to suffer any noticeable slowdown in workload – at least into the first quarter of 2023 – as PSMJ has found that markets and submarkets recording an NPMI above 20 should be considered healthy in the short- and mid-term.
