Houston’s Healthcare Sector Braces For Construction Surge

Houston’s healthcare sector is starting to ramp up its construction activity again, even as the sector approaches the one-year anniversary of pandemic-related shutdowns and closures.

“From the construction side, I've just heard two owners and an architect say that there was a pause, and now there's a surge coming,” McCarthy Building Cos. Vice President of Preconstruction Judah Auld said during a Bisnow digital event on March 4.

Auld said much of the healthcare construction work halted in Houston in April, and in some cases, that pause lasted all the way through to the beginning of 2021. But now, Auld estimates that between 80% and 90% of those projects have come back online in some form, as well as other projects that were only in the early stages of planning a year ago.

“There’s actually a real concern for midsummer to end of the year [for] our subcontractor capacity and the trade capacity out there, and making sure we get the right contractors working on these healthcare projects,” Auld said.

Aside from a shortage of some subcontractors, the healthcare sector is also facing skyrocketing material costs, reflecting the damage that tariffs and the coronavirus pandemic had on the global supply chain. Auld pointed to the expense of acquiring steel and lumber as some examples.

“I think currently, you can get some good labor savings if you're bidding right now. But it's pretty much being offset by the commodities going up,” he added.

Texas Children’s Hospital Senior Vice President Jill Pearsall said the pandemic offered the hospital system an opportunity to step back and re-evaluate the “hundreds of projects” that were in the works.

“Some projects were deferred, some were canceled. But I think the best part that's come out of it is a real look-in-the-mirror opportunity to say, why were we doing this project in the first place? Is it applicable? Do we need to do it now?” Pearsall said.

Texas Children’s Hospital has been asking more critical questions about those projects, particularly in light of the far-reaching impact the pandemic had on operations, finances and supplies.

“I think it's probably something that we were hesitant to do before, to really ask ourselves those questions. Now we should and have an opportunity to analyze projects a little bit more,” Pearsall said.

The opportunity to pause and re-evaluate has also led to some changes in the types of projects that healthcare systems in Houston actually want to build. 

HDR Health Director Jim Thomson said his firm consulted 75 hospital clients to find out their construction pipeline plans. The feedback has highlighted a focus on ambulatory care, focusing specifically on behavioral health.

“That's the next surge, that's the next epidemic that's coming, is all the people who have now dealt with the pandemic, now over the past 12 months, them needing help,” Thomson said.

Other lessons from the pandemic are translating into specific facility requests. These include renovation of existing spaces to create better air quality and flexibility and support surge capacity. Technology has also become a major focus for healthcare systems, as the pandemic supercharged the uptake of virtual healthcare visits.

“What used to be a real struggle for us has become a strength, really, in terms of being able to videoconference and pull people together,” said Jay Miranti, MD Anderson Cancer Center’s director of Capital Projects Facilities Planning, Design and Construction.

That emphasis on technology is also translating into higher costs. Auld noted that historical price forecasting models over the last two to five years have not kept up with new technology costs, and that has only been exacerbated by the pandemic. Healthcare clients are not looking at having just one telehealth room, but ensuring that providers can provide telehealth services from any room.

“Our technology budget and integration [has] just skyrocketed,” Auld said.