Annual Construction & Design Survey shows continued pickup in projects, with many going forward on a smaller scale
The healthcare construction industry is coming back, but it’s a comeback with a different look— smaller projects and an increasing focus on outpatient care, according to Modern Healthcare’s 33rd annual Construction & Design Survey.
Participation in the survey decreased this year, with 173 companies completing sur- veys compared with 196 in 2011 and 186 the previous year, but that trend could reflect consolidation in the industry. For example, architecture firms Anshen & Allen and Burt Hill are no longer listed separately on the survey as both are now part of U.S. operations for Stantec, a multinational construction giant.
One company whose business moved somewhat opposite of the prevailing trend was Gilbane Building Co., which finished second on the list of construction management companies after registering a nearly 109% increase in dollar volume and a 114% jump in construction volume. Last year, it completed the 1.2 million-square-foot Fort Belvoir Community Hospital on a U.S. Army base in Virginia and the new 850,000-square-foot Elmhurst (Ill.) Memorial Hospital in the Chicago suburbs.
“We had a lot of large projects last year,” says Brian Garbecki, a Gilbane vice president. “Some of the smaller projects went away (during the recession), but the large projects kept going.”
Unlike residential and retail construction, it was previously believed that once a healthcare construction project got rolling, work didn’t stop until it was completed. The recession changed that.
For the past three years, Modern Healthcare’s survey has been tracking work stoppages—numbers that have been steadily improving since 2009.
In 2011, among the companies participating in the survey, 67 (or about 39%) reported being involved with a project where work was stopped or postponed. In all, they said worked stopped on 244 projects in 2011, but resumed on 72 of those projects by year’s end. Also in 2011, respondents reported that work had resumed on 67 projects where it had stopped in 2010.
“Some of the projects that went on hold came back slightly smaller—but with room to expand and be more flexible,” Garbecki says.
In last year’s survey, 91 companies (46%) reported having projects stop or stall in 2010. In all, they said work stopped on 314 projects in 2010, but resumed on 98 of those projects before the year was over. Also in 2010, respondents reported that work resumed on 105 projects where it had stopped in 2009.
Not surprisingly, the worst numbers are from 2009 when 116 companies (62% of those surveyed) reported they had projects stall. In all, they said work stopped on 575 projects in 2009, including 135 that restarted later that year.
Andrew Quirk, senior vice president for Skanska USA, says “a right-sizing of buildings” is taking place as these projects come back with revised plans that are minus the huge atriums, fountains and other “nice finishes” that have been erased from their original designs.
“Every dollar is being scrutinized and a return is expected on every dollar,” Quirk says, although he adds that clients are asking for “shell space” to be incorporated into designs to accommodate future growth or new technology.
During the recession, he says Skanska made sure clients had the money needed to finish projects before signing on to do the work.
“We took a step back and we almost interviewed clients as much as they interviewed us,” Quirk recalls. “We had to walk away from a few projects and that really helped us in the long run.”
Skanska, which finished No. 5 among the construction management firms participating in this year’s survey, experienced less than 1% growth in dollar volume and a 10% drop in construction volume compared with 2010. Still, Quirk was optimistic that better days are ahead.
“We had a pretty good 2011 considering the market and healthcare in general,” he says. “We expect our construction and dollar volume to increase because we had our best year ever in sales.”
That optimism prevails even though Quirk predicts projects will continue to shrink, and where $250 million was once typical for hospital construction projects, he says that has decreased to $100 million and adds that this will likely fall further and that $50 million to $75 million will be the new normal.
There are still major projects out there, however, and Skanska is working on two of
them: The $248 million, 95-bed Nemours Children’s Hospital in Orlando, Fla.; and the University Medical Center complex in New Orleans, where Skanska was awarded a $680 million contract in a venture with MAPP Construction to build a 560,000square-foot, 424-bed hospital. The project includes a 747,000-square-foot diagnostic and treatment center, a nearly 256,000square-foot ambulatory-care building and other facilities that are scheduled for completion in 2014.
Located in Orlando’s Lake Nona medical-city complex, Nemours Children’s—which won a citation award in Modern Healthcare’s 2011 Design Awards (Sept. 26, p. 27 )—is expected to open this August.
“That’s a neat hospital,” Quirk says. “They’ve done some innovative things to lower the anxiety level of kids and family coming to the hospital.” This includes using technology that alerts staff to the arrival of regular visitors and identifies them so staff can greet them by name.
Mock-up rooms were built to test the layout of the facility, which includes having children lie on beds to make sure the television and video-game system had the proper sightlines and controls were conveniently located.
Quirk says that during these tests, one child was asked, “What do you think of the garden?” and the child replied, “What garden?” The response led to a lowering of the window sills to make sure young patients
by construction phase in 2011
had adequate views of the outside world from their beds.
Another notable children’s hospital project is the $1 billion, 104-bed addition at Stanford University Medical Center’s Lucile Packard Children’s Hospital in Palo Alto, Calif., where DPR Construction is the general contractor. Finishing seventh among the general contractors responding to this year’s survey, DPR reported an almost 50% drop in dollar volume and an almost 27% drop in construction volume.
“Next year, our numbers will probably be back up to where they were in 20092010,” says Hamilton Espinosa, DPR’S national healthcare leader. “It’s not like we’re not busy.”
Last September, DPR completed the first phase (and it recently won the contract for the second phase) of the Banner MD Anderson Cancer Center in Gilbert, Ariz.; in October it placed the last beam in a topping-off ceremony at the $1.5 billion UCSF Medical Center at Mission Bay complex in San Francisco, which will include a 183-bed children’s hospital, a 70-bed cancer hospital and a 36-bed women’s specialty hospital when it opens in 2015; and just last month it topped off the $300 million Alta Bates Summit Medical Center Patient Care Pavilion in Oakland, Calif., scheduled to open in 2014.
“It’s been a good turnaround in the marketplace,” Espinosa says. “It seems people are finally releasing some capital and doing some work.”
The numbers were way up for the No. 2 organization among the development companies responding to this year’s survey, Jones Lang Lasalle, which saw its dollar volume jump nearly 200% and its construction volume increase 114%.
Shawn Janus, managing director of healthcare development for the Chicagobased company, credits the increases to the
The $248 million, 95-bed Nemours Children’s Hospital is scheduled to open in August. The facility is part of a medical-city complex in Orlando, Fla.