Proposal activity for healthcare construction projects remained generally positive, but continued to lose ground in the fourth quarter of 2022, according to the PSMJ Resources Quarterly Market Forecast survey of architecture, engineering and construction leaders. After riding a wave of historically high levels from the second quarter of 2021 through the second quarter of 2022, healthcare proposal activity has dipped the last two quarters.
The net plus/minus index, which PSMJ has used to track proposal opportunities in the A/E/C markets and submarkets since 2003, slid to 31.9, down from 38.6 in the third quarter. PSMJ’s NPMI represents the difference in the percentage of respondents reporting an increase in proposal activity for a market or submarket and those reporting a decrease. For the fourth quarter of 2022, 44.7% of survey participants said that activity increased compared with 12.8% that reported a decrease.
PSMJ research finds that the cooling of healthcare market proposal activity is driven by increased costs for borrowing and materials, as well as labor and supply chain issues.
While a substantial decline from the 60 NPMI recorded in the second quarter of 2022, the result still indicates a fairly strong market that is likely to rebound quickly. Over the 20-plus years of the survey, PSMJ has determined that any NPMI above 20 reflects a relatively healthy outlook.
The four healthcare submarkets were also flat in the fourth quarter. Continuing care facilities recorded the best NPMI of the group at 30.2 (down from 33.3 in the prior quarter), followed by medical office buildings (28.3, down from 48.7), medical laboratories (26.3, down from 28.6) and hospitals (25, up from 23.5). All four of these submarkets were riding close-to-record highs in the second quarter of 2022, each with an NPMI at least 20 points higher than it was in the fourth quarter.
Despite losing some steam in the second half of 2022, the healthcare market continues to be one of the most consistently solid for A/E/C proposal activities. Throughout the 20-year history of the survey, neither the overall market nor any of its submarkets have ever recorded a negative quarter (i.e., more survey respondents reported a decrease in proposal activity than reported an increase).
