Construction for health care bucks slump

September 07, 1991|By Jube Shiver Jr. | Jube Shiver Jr.,Los Angeles Times B

Despite a real estate slump that has idled 600,000 construction workers nationwide and plunged scores of developers into bankruptcy, health-care building remains robust, as facilities from California to Virginia expand.

Health care is expected to account for $9.5 billion in new construction this year. The field is drawing the attention of beleaguered real estate developers, architects, contractors and others hurt by the downturn in traditional office construction, but the boom could slow as new federal rules limiting such spending are phased in over the next decade.

In the first six months of 1991, new construction of private hospitals and other health-care institutions totaled $4.6 billion. That was 5 percent more than in the same period in 1990 and double the amount in the first half of 1986, according to the Commerce Department.

Construction of public hospitals this year had fallen 10 percent, to $1.2 billion, through June. But a March survey by Modern Healthcare magazine found that two-thirds of 192 architects, builders and construction companies expected the overall health-care field to continue to grow for the rest of the year.

Nationally, construction jobs fell from a high of 5.4 million jobs in February 1990 to about 4.8 million in April 1991.

The growth in health-care construction has been fueled by demand for medical services, new medical technology and federal policies that encourage hospitals to build facilities designed to treat the ill on a relatively inexpensive outpatient basis rather than keeping them overnight in costly acute-care hospital beds.

Health-care construction also has been insulated because it has escaped the credit crunch that has hobbled the $25.2 billion commercial office building market. Most public hospitals are financed by revenue bonds issued by local health-care agencies. Private hospitals and medical office buildings are often financed from a company's cash flow or long-term corporate borrowing.

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