May 21, 2019
The increasing cost of materials, particularly steel, coupled with a scarcity of skilled labor, is impacting healthcare construction, according to the 2019 Modern Healthcare Construction and Design Survey.
Hospitals and healthcare systems are altering their construction plans to curtail expenses, and in some cases, they’re delaying projects because their existing budgets can’t accommodate the increased costs. While most respondents cited increases in project costs of 3% to 6%, some cited as much as a 30% increase.
“We’re not seeing a lot of projects being outright canceled, but we are seeing a fair amount of delay while we work very hard to stretch every dollar,” says Robin Savage, president & COO of construction firm Robins & Morton.
Survey respondents blame the U.S. tariffs on goods produced outside the country for the price increases. “Tariffs on steel and aluminum imposed in early 2018 have increased the cost of construction, and have the potential to dampen healthcare-related development,” says Lisa Strope, director of research at real estate management firm JLL. “Increasing costs are pushing borderline projects past the threshold of profitability across a multitude of sectors.”
Savage notes that his firm has been forced to reduce a project’s scope or make quality reductions due to increases in construction costs and demand for subcontractors and skilled labor. “Our biggest challenge now continues to be staffing and craft labor, making sure we have adequate resources to get things done right,” he says.
*Pictured: Robins & Morton project, MaineGeneral Medical Center, Augusta, ME
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