Builders see health care take the lead, inject growth

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The rise in health care construction projects comes as no surprise to James Taylor.
 
"An aging population needs more services-and more facilities to house those services," says Taylor, CEO of Penfield-based Taylor, the Builders. "As long as we keep getting old, we keep needing more and more."
 
Aging facilities, coupled with the aging of the population, have brought health care construction projects to the forefront and are responsible for growth in the industry, builders say.
 
Taylor says health care projects are roughly 30 percent of his firm’s work, and that share continues to increase.
 
As work has waned in sectors such as retail and commercial, health care has had growth, Taylor says.
 
"If you are not in the health care game, you are really missing out," he says.
 
Taylor, the Builders predominantly works on health care projects that are not part of traditional hospital campuses. These include medical facilities that provide outpatient services and private practitioner offices.
 
Taylor’s company is completing work on an outpatient facility in Canandaigua and is involved in the early stages of an assisted living project for senior citizens there as well.
 
Health care is not a segment of the market that Taylor expects to get smaller anytime soon, although the types of projects may change over time. Instead of an abundance of new construction at hospitals, for example, the trend is toward new facilities away from main campuses for outpatient and urgent care, Taylor says.
 
William Mack, executive vice president at LeChase Construction Services LLC, says his firm also has seen a rise in health care construction. Health care traditionally has been one of LeChase’s major markets, he says, along with higher education and industrial projects, but this year health care seems to be leading the charge.
 
LeChase is working on a number of projects in the area, including the modernization and expansion project of Unity Health System and the expansion project at the Golisano Children’s Hospital at the University of Rochester Medical Center. LeChase also is involved in ongoing renovations for Thompson Health.
 
The region will have a fair amount of construction work in the health care sector over the next several years, Mack says, and demographic changes, health care reform and overall easing in credit markets are some of the reasons for that. Surging public interest in health and wellness also is driving the growth, he says.
 
Historically, however, construction in the health care sector has been cyclical. Currently the area has a number of large projects, but once those near completion, Mack says, the region could enter the slower part of the cycle. And as construction work declines in other sectors-particularly the public sector-more contractors may seek to compete for health care projects.
 
Many good contractors are vying for the work, and it is not clear whether there will be enough to sustain the construction workforce, Mack says.
 
Taylor believes there is ample work in the health care sector but notes that it is not that easy to land the jobs. A fair amount of expertise often is required to work on such complex projects, and particular certifications may even be required for facilities that will house medical equipment.
 
"It helps to have the experience," Taylor says. "They aren’t jobs where someone can pick up a phone book and pick a random name to do the project."
 
Mack agrees: "Not anyone can walk in and do this type of work."
 
He says LeChase has a breadth of experience that helps it compete for more projects. What is most important in the construction industry, however, is diversification, he says, since it is key to surviving in a tough economic environment.
 
Construction in health care is a specialty, and it is important to focus on the market without becoming solely dependent on one sector.
 
"You can’t focus on one market," Mack says. "It limits your ability to compete."
 
Taylor also makes sure his jobs come from many industries. He does not fear any short-term saturation in the market, but notes that health care, like any other sector, fluctuates according to outside factors such as state and federal regulations.
 
The health care market hit a bump roughly a year and a half ago when talk of a universal health care system spread fear among some health care providers. They were worried about how reimbursements would be affected by such a consolidation, and some put the brakes on construction projects, causing a slowdown for roughly six months.
 
John Goodrich, senior vice president at LeChase, says health care is like any other industry in having financing hitches or project delays.
 
The credit squeeze affected all markets, although health care may have fared better than markets such as retail because of the creditworthiness of the institutions doing major projects, Mack notes.
 
Taylor is paying attention to the current state budget process to see how reimbursement levels in medical programs are addressed, because that could affect health care projects too.
 
"It’s something we will continue to watch," Taylor says.

2/10/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email [email protected].