Exclusive: Development pipeline remains firm for health construction

Glenigan’s July Construction Review shows growth, despite initial dip in work on site

  • Health contracts rise 118% in quarter 2 against last year’s figures
  • Underlying health detailed planning approvals increase by nearly 50% against 2020 figures, totalling £770m
  • Hospital project starts account for 48% of sector growth, totalling £215m
  • Huge growth for project starts in Scotland, up 893% against 2020’s quarter 2
  • Spike in health approvals in the East and South East of England
  • Value of work on site in quarter 2 drops 22% when compared to one year ago

The outlook is promising for the healthcare construction industry, according to a new Glenigan report. Michael Gaida from Pixabay

Despite an initial dip in work commencing on site during the second quarter of 2021, the healthcare construction sector has plenty to be optimistic about, according to Glenigan’s July Construction Review.

The latest edition of the monthly report from the construction industry’s leading insight and intelligence experts, provides a detailed and comprehensive analysis of construction data, giving built environment professionals unique insight into results from the second quarter of 2021.

Continued optimism

And there are reasons to be optimistic as the construction industry, as a whole, continues to show increased growth against 2020.

Speaking exclusively to BBH Glenigan’s economic director, Allan Wilen, provide an overview of the figures and what they mean for the healthcare construction sector moving forwards.

A rise in main contract awards points to a strong pipeline of projects, increasing 12% against the first quarter of 2021 and up 82% on last year and 9% on levels in 2019.

However, a slight 0.8% dip in the volume of work carried out on site during May, and a 17% decrease in the value of project starts in the first quarter of this year indicates momentum is moderating following a burst of activity in the early months, in part exacerbated by supply-side shortage.

But, against the context of a 6.3% increase in output during the three months to May, this demonstrates industry resilience, according to the report.

It’s reassuring that many regions are experiencing a rise in health approvals and with hospital project starts up nearly 50%, the health sector is proving a valuable asset to the construction sector’s overall recovery

And healthcare, in particular is showing a strong pipeline, with contracts increasing 118% against last year’s quarter 2, and up 76% on the same time frame in 2019, to total £1,108m.

A decline in work on site was due to a complete absence of major projects worth £100m or more.

However, underlying project starts of less than £100m are up 6% against last year.

Building the pipeline

Underlying health detailed planning approvals increased 46% against the previous year to total £770m, this was up 27% on the preceding quarter and 62% higher than the same period in 2019.

The value of health approvals overall has also risen by 14% compared to the same period in 2019, although no major health projects were granted detailed planning during the second quarter of both 2020 and 2021.

Hospitals are looking healthy

Hospital project starts accounted for 48% of the sector during the second quarter to the value of £215m.

But, in context, the value is down 48% against the same time period in 2020 and down 12% on 2019 figures.

Dental, health, and veterinary work starting on site fell by nearly a quarter (24%) against the previous year, and 59% compared with two years ago to total £34m.

But nursing home project starts helped to boost growth, climbing 24% and accounting for a quarter of the sector.

Yet this still remains 24% lower than the same period in 2019.

Scotland bucks the trend

Despite a national decline in project starts, Scotland saw triumphant growth in quarter 2, up 893% against the previous year and 93% compared with the same period in 2019.

The East of England also saw growth, bucking the trend nationally to climb 126% in the second quarter of this year against the previous year and 128% on the same time in 2019 to total £72m.

The East of England is a key area for growth, boosted recently by the approval of a £44m extension to Colchester General Hospital

A rise in regional health approvals

The East of England also achieved four-digit growth in this year’s quarter 2 against the previous two years to total £224m for health approvals.

The region accounted for nearly a third of sector approvals (29%) and was boosted by approval of a £44m extension to Colchester General Hospital.

Although we’ve seen a 22% drop in the value of work carried out on site compared to last year, we can see the sector is in the process of building a strong pipeline of projects

And the South East also performed well, growing 132% on figures one year ago, and 8% on the same period in 2019.

This accounted for a 15% growth of the sector and was due to several underlying schemes of less than £100m being granted approval.

Commenting on the findings, Wilen said: “Although we’ve seen a 22% drop in the value of work carried out on site compared to last year, we can see the sector is in the process of building a strong pipeline of projects.

“It’s reassuring that many regions are experiencing a rise in health approvals and with hospital project starts up nearly 50%, the health sector is proving a valuable asset to the construction sector’s overall recovery.”

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