Momentum no longer building
While there’s still pent-up demand for new healthcare construction and planning for new projects continues at a heavy pace, economic and political uncertainty are leading to another slowdown in the sector.
“The acute-care inpatient space has been slow and will continue to be slow,” says Shawn Janus, managing director for healthcare development at Jones Lang Lasalle, a Chicagobased financial and real estate services firm. “We’ve seen that business get diminished quite a bit.”
Janus explains that the cloudy future of the Patient Protection and Affordable Care Act— which has yet to be fully enacted and faces a crucial U.S. Supreme Court ruling this year— is one reason. “There’s indecision that has crept back in,” he says.
Chip Cogswell, formerly with Jones Lang Lasalle and now national healthcare director for Turner Construction Co., agrees and explains how uncertainty over finances along with the increase in mergers and acquisitions is “consuming intellectual capital” that would otherwise be directed toward expansion and renovation projects. But Cogswell adds that the uncertainty hasn’t diminished the demand for new facilities as the average age of hospitals continues to rise. Healthcare facilities “aren’t getting any younger,” he says.
Janus says planning has become the busiest area of Jones Lang Lasalle healthcare operations, noting that, “We’re growing by leaps and bounds there,” and this is partly driven by system mergers and hospital acquisition of real estate held by physician practices.
Also, outpatient facilities are becoming more of a focus, and he explains that today’s medical office buildings are increasingly complex in terms of the equipment they contain and procedures that can be performed there. The ownership and operation of the facilities is becoming more elaborate as well. Different parties may operate their own surgical, dialysis and imaging operations but share waiting, procedure and treatment rooms.
“It’s not the old MOB doc in the box,” he says, adding that the medical office building of old was typically about 40,000 square feet, but new models are now between 100,000 and 200,000 square feet.