Participation in the survey increased 5.4% this year, up to 196 companies, compared with 186 last year. Of those, 91 or 46% reported having projects stop or stall during the year.
In all, they reported that 314 projects were stopped at least temporarily. Of the companies that reported stalled projects, 48 (52.7%) reported that some of them resumed work again. Survey participants reported working on 98 projects that stopped and restarted in 2010.
“Each project has its own story, however most revolve around delay to securing financing, incorporating budget reductions and dividing projects into smaller phases,” reports Birmingham, Ala.-based Johnson Development Corp. in its survey response. “One project was delayed awaiting county approval of additional land required for the project.”
Unlike retail and residential construction, healthcare projects traditionally keep going once they get started, but the recession changed all that. Survey participants cited economic and political uncertainty as major reasons for healthcare construction projects to stop in their tracks. Sometimes this led to stopping or postponing work and other times it led to redesigning the project to make it smaller in scope.
Of the 186 companies participating in last year's survey, 116 (62.4%) said they had projects stall in 2009. In all, 575 projects were reported stopped and, of those, 135 restarted during 2009. In this year's survey, companies report working on 105 projects that had stopped in 2009 and restarted in 2010.
In the construction management sector, No. 1 Turner Construction Co. reported modest increases of 0.8% and 2.2% in dollar volume and square footage, respectively. The No. 2 construction management company, McCarthy Building Cos., showed stronger gains of 21.6% and 19.1% in dollar volume and square footage, but some other industry-segment leaders saw declines in dollar volume or square footage.
For some firms, increases in their numbers were a reflection of a merger. Cannon Design, which merged with OWP/P in October 2009, moved up to the No. 3 spot on the ranking of architectural firms from No. 5 in last year's survey.
Stantec, an Edmonton, Alberta-based planning, engineering, architecture and project-management company, remained in seventh place on the ranking of architectural firms, but its placement is bound to be affected next year as last year it purchased the No. 6 architecture firm, San Francisco-based Anshen & Allen, as well as Philadelphia-based Burt Hill Inc., which ranks No. 35 on this year's survey.
According to this year's survey, Stantec Architecture reports a 60.9% increase in dollar volume, to $1.8 billion in 2010 from $1.1 billion in 2009—which was up 55.2% from its 2008 total of about $728 million.
The 2010 dollar volume reflected company acquisitions as well as “organic growth,” says Stanis Smith, Stantec's Vancouver-based senior vice president for buildings, adding that for the firm's Canadian operations “it was one of our most profitable years last year.”
Roger Swanson, former CEO of Anshen & Allen and now a Stantec vice president, says some U.S. projects “we thought were going to happen did not happen” particularly in California, but says work on not-for-profit hospitals has been “fairly steady.”
“They are dealing with projects that there is a substantial need for,” Swanson says. “The availability of money has been a problem, but that is easing up somewhat.”
Smith also says that healthcare is now Stantec's largest industry sector and “that has been by design.” In 2011, Stantec's work includes one of the largest projects in the U.S.: the $1.5 billion UCSF Medical Center at Mission Bay in San Francisco. After a groundbreaking ceremony in October, work began in earnest in December on the healthcare complex, which will consist of a 183-bed children's hospital, 70-bed cancer hospital and 36-bed women's specialty hospital. The project is expected to be completed in 2014.
“Our industry has gone through a particularly tough time,” Smith says. “I certainly think the worst is over.”
Smith also hints that Stantec's growth by acquisition is likely to continue.
“We are interested in being top-tier in all of the sectors we operate in,” he says. “We look at firms to join us who can bring strong expertise and market presence.”
Deborah Sheehan, formerly with OWP/P and now a principal in Cannon Design's Chicago office, says there were a few “technology hiccups” in merging the two companies, but adds that combining two revenue streams helped the company grow in a difficult economy.
“I think it's definitely looking up,” she adds. “Since last October, we've seen an incredible amount of requests for proposals coming in.”
Although political and economic uncertainties remain, Sheehan says organizations have been preparing for the day they can cut loose with plans that were developed during the economic downturn.
“We saw a lot of planning and studies last summer,” she recalls. “A lot of our work now is taking a look at old plans and trying to reprocess them under a lean plan.”
As the scope of healthcare construction gets smaller, Sheehan acknowledges that “perhaps we were building them too big before.”
While relatively optimistic about the short-term future, Sheehan says she worries about the long-term effects of the recession, which created a “race to the bottom” with firms cutting their fees to the narrowest of margins in an attempt to land the few projects that were available.
While this may straighten itself out, her concern is that the poor economy led many talented students to abandon their design career paths and go into work on animation or video games instead, Sheehan says.
“Clearly, there is concern among students about ‘I need to find a job'; it's a paramount concern for them,” she says. “We've seen the rebound and there is improvement, but it's not at all what I would call great.”
New York-based Skanska USA remained in the No. 4 spot on the construction management ranking despite a nearly $104 million drop (7.6%) in dollar volume. But Andrew Quirk, a senior vice president for healthcare in the company's Nashville office, says that—since late last year—Skanska has been in “one of our busiest periods ever” in terms of requests for proposals and discussions with clients.
“There has been a huge increase in medical office buildings,” Quirk says. “And it's not so much we're replacing hospitals on greenfields; a majority of the work has been in additions and renovations.”
While Quirk says he's seen a nationwide resurgence in healthcare construction, he says the hotspots are the Northeast and mid-Atlantic regions along with California, Florida and Ohio.
He credited the construction resurgence to two factors: the return of the financial markets and the realization that passage of the Patient Protection and Affordable Care Act didn't cause the end of healthcare.
“People had six to nine months to get used to reform,” Quirk says. “They went to bed and woke up, and the sun always rose and they'd still see patients.”
Another reason for the activity is that the need for new facilities didn't go away, and Quirk says the recession led to two years of pent-up demand.
“They said, ‘We can't wait any longer,' and as commodity prices were down and labor was cheap, it became a perfect time for people who were ready to get going to get going immediately,” Quirk says. “There is still a little bit of caution and uncertainty, but people are ready to move forward—really out of necessity.”
Quirk predicts continued growth in the construction of facilities where the care delivered provides higher financial margins. These include cancer treatment, emergency medicine, heart health, and women and children's specialty care. Because these facilities are in such demand, organizations go to great lengths to maintain operations even while major renovations are taking place.
Quirk says last year Skanska worked on a renovation of 20 operating rooms at Atlanta's Piedmont Hospital using a temporary rooftop structure to provide access for construction materials and crews. This arrangement allowed 18 surgical suites to remain open during construction.
“We had zero disruptions to ongoing operations,” he says.
Meanwhile, dollar volume and square footage were up 9.3% and 11.6%, respectively, for St. Louis-based HBE Corp., the top company on the ranking of design-build firms.
Alan Burcope, an architect and HBE vice president of project development, says the company has kept busy in California as organizations there strive to meet the state's seismic-safety standards that were enacted in 1994 and have a 2013 compliance date.
Burcope says depressed material and labor costs are overrated in terms of how much they motivate people to move forward with construction projects. He adds that this is especially true in areas where, or for government-funded projects on which, regulations require construction crews must be paid the area's average or prevailing wage.
“If you're depending on a down economy as your de facto method of creating value, what will you do when the economy improves?” he asks.
HBE's workload is 100% healthcare, Burcope says, and of its work in 2010, he points to the 374-bed Orange Regional Medical Center in Wallkill, N.Y., as one of the company's most significant projects.
Now collectively known as the Arden Hill and Horton campuses of the 343-bed Orange Regional Medical Center, the Arden Hill Hospital in Goshen, N.Y., and the Horton Medical Center in Middleton, N.Y., merged in 2002. They are about eight miles apart, with Arden Hill about five miles from the new facility and Horton about two miles away from it.
The new hospital will replace both facilities—both of which are more than 40 years old. The project is expected to cost $255 million, plus another $100 million for various financing and debt refinancing costs. Of that, HBE received $195.5 million for architecture, engineering and construction work, according to a news release. It is said to be the first brand-new hospital built in New York in 20 years.
“They knew it was a project that had to happen,” Burcope says. “It was a breakthrough project for us.”