The COVID-19 public health emergency (PHE), declared under Section 319 of the Public Health Service Act, officially ended on May 11, 2023, with daily reported cases down 92 percent, COVID-19 deaths down by 95 percent, and hospitalizations down 91 percent since January 2021. With the end of the PHE, here are the top trends affecting the health care and life sciences markets and their impact on our industry.
Life sciences experiences accelerated growth. For the last decade, the life sciences market outpaced all other major commercial real estate (CRE) asset types in total U.S. inventory growth. According to a Cushman & Wakefield report, total inventory for life sciences grew 34 percent over the course of seven years, between 2015 and 2022, and grew 19 percent over the last three years, from 2019 to 2022. (See chart below for CRE asset class comparison.)
Venture capital investment declines amid slowing economy. Life sciences venture capital (VC) funding in North America hit a record high of approximately $49 billion in 2021. But in 2022 that funding dropped by 28 percent, and private equity funding also dropped 24 percent year over year (YoY) to $37.3 billion. Global VC and initial public offering funding dropped a combined 45 percent from their 2021 peak, to $66.6 billion in 2022, according to PitchBook data. Overall, investments from VC fell YoY due to volatile market conditions, rising interest rates, and bank failures. The sector faces continued risk in 2023 as several biotech companies have invested with the banks that experienced failure.
NIH funding hits seven-year record high. National Institutes of Health (NIH) funding hit a new record in 2022 at $36.7 billion, a 2.7 percent YoY increase. This was the seventh year in a row that funding has hit a new all-time high. Fifty percent of funding for life sciences markets are sourced from the NIH. Between 2018 and 2022, these key markets received the most funding:
Telehealth usage remains above pre-COVID-19 numbers. A Bipartisan Policy Center survey of 28 million to 30 million participants reported that in 2019, 1 percent of Medicare beneficiaries participated in telehealth. In 2020 that number surged to 44 percent, but in Q1-Q3 2021, usage dropped to 28 percent. During the same 2021 quarterly reported period, between 40 percent and 50 percent of those visits were for behavioral health. The U.S. Department of Health and Human Services indicates that many telehealth services will continue through 2024, despite the end of the PHE.
Vertical villages, a new design trend that’s picking up attention, consists of stacking multiple health care functions. As urban centers become overcrowded and overpopulated, and outpatient service demand increases, medical centers are looking for a creative way to expand their footprint. The high-rise hospital design allows for co-located functions, including medical training, clinical trials, and research and development, while creating extra revenue streams for building owners who can lease floor space for residential or retail use, conferences, or local community needs. The vertically designed infrastructure can also ease travel distances, improve wayfinding and hospital efficiencies, and provide access to natural sunlight.
Further, per the American Hospital Association, 65 percent of community hospitals are in urban environments, versus 35 percent located rurally. Therefore, the design industry must look at a way to fit several medical functions into each facility within these densely populated and urban areas. One design solution is a vertical tower versus a horizontal plan. This kind of design, however, could also bring new airflow challenges that would need to be addressed by industry experts, including mechanical, electrical, and plumbing and structural engineers.
When it comes to the health care market, architects often lead the design and contract. Therefore, it is key to know who the major players in the market are to team with for future work. Below are the top 10 architectural firms participating in the health care space by revenue, as well as which firms are also members of ACEC National.
Commercial & Residential Real Estate
Health Care & Science + Technology
Intermodal & Logistics
Energy & Utilities
The Private Side column in Engineering Inc. focuses on the private-sector markets listed above, and information and insights on economic data relevant to the industry. For more on these topics, subscribe to ACEC’s bimonthly Private Industry Briefs: https://www.acec.org/resources/private-market-resources/#newsletter.
Diana Alexander, CPSM, is ACEC’s director of private market resources. She can be reached at email@example.com.