Low tax revenue has caused governments to cut funding for municipal construction projects
Los Angeles, CA (PRWEB) May 02, 2013
The Hospital Construction industry has faced challenging conditions over the past five years, with industry revenue contracting at an annualized rate of 4.3% to $27.1 billion. In addition to the broader downturn facing the construction sector, hospitals faced a high degree of fiscal uncertainty due to potential changes from the Patient Protection and Affordable Care Act. Furthermore, “because of low profit margins during the recession, hospitals shelved expansion plans and new construction work due to lower available cash to finance these projects,” says IBISWorld industry analyst Caitlin Moldvay. In 2013, industry revenue is expected to continue declining, falling 2.6% during the year, based on the latest available monthly data from the US Census. In particular, demand for public hospital construction is expected to fall at a faster rate than private construction during the year.
The Hospital Construction industry includes both private and public hospital construction; private hospital construction makes up 73.2% of the total. “From 2008 to 2011, gains in public hospital construction helped mitigate the industry's losses due to rising demand for hospital construction by the federal departments of Defense and Veterans Affairs,” says Moldvay. “In 2012, however, this trend reversed itself as reduced tax revenue has caused states and local governments to cut funding for municipal construction projects.” Consequently, in recent years, public hospital construction has fallen at a faster rate than private hospital construction.
Over the next five years, the Hospital Construction industry is expected to enter into a recovery period. The implementation of the Patient Protection and Affordable Care Act will result in more than 32 million individuals gaining access to healthcare insurance coverage, driving up the demand for hospital services. Furthermore, the gradual aging of the US population will also result in greater demand for hospitals. Hospital construction will also benefit from low interest rates, which will enable lower borrowing costs for financing construction projects. In line with the construction sector in general, the largest firms in the industry are general contractors. On large-scale projects, these players often hire subcontractor firms that undertake distinct, specialized segments of the construction process. These subcontractors represent the majority of industry participants, and typically compete solely on a local or regional basis, contributing to industry fragmentation. The narrow scope of this industry also decreases larger firms' market shares and decreases concentration. Current major companies include Turner Construction Company and McCarthy Holdings Inc. For more information, visit IBISWorld’s Hospital Construction in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
The industry includes operators that engage in new work, additions and reconstruction projects for hospitals. These include both private and public hospital construction projects.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.