With strong activity and an encouraging outlook, the healthcare sector remains one of the bright spots within the Australian construction industry.
In 2010, the combined value of work done on health and aged care facilities in Australia amounted to $3.955 billion, up 12.99% when compared with the previous year.
Activity relating to aged care by itself actually shrank by more than a third. This, however, was more than offset by strength in the core healthcare sector, where the value of work done grew by 36.5% to reach $3.206 billion.
Going forward, the Construction Forecasting Council (CFC) expects activity to ease off in 2011. The CFC is forecasting combined health and aged care activity of $3.270 billion this year. Whilst this represents a decline of 17.1% on 2010, it will still be a respectable outcome when compared with activity levels of earlier years.
Moreover, the long term prognosis is encouraging. In its Annual Construction Market Outlook 2011/12, building information services provider BCI Australia projects a bullish outlook, with a strong pipeline of projects driving healthcare activity and an aging population underpinning demand for aged care facilities. BCI predicts that in 2011, the value of construction starts in healthcare will increase by 46.5% to $5.379 billion whilst those in aged care will surge 70.4% to $1.983 billion (refer chart). This bodes well for activity in 2012 and beyond.
State by State
New South Wales/ACT
Conditions in New South Wales and the Australian Capital Territory (ACT) were subdued last year.
According to figures from the Australian Bureau of Statistics (ABS), the combined value of work done in health and aged care throughout the state and territory amounted to $1.091 billion, down by 7.7% when compared with 2009.
The immediate outlook is not encouraging. Although the value of approvals in the six months to February ($306.4 million) was up by more than a third when compared with the half year prior to that, the CFC believes that activity will fall back to $978.93 million this year.
However, a modest pickup is likely toward the end of the year and into 2012 when work kicks off on projects such as the Sydney Adventist Hospital in Wahroonga, the Northern Beaches Hospital at Frenchs Forest and the Life City Wollongong Hospital in Berkeley. As a result, the CFC believes that activity will reach $1.105 billion by financial year 2012/13 and rise further to $1.256 billion by 2014/15.
Victoria
Combined activity in the healthcare and aged care sectors declined 5.8% to come in at $930.8 million in Victoria last year.
As with New South Wales, the near term outlook is not encouraging. The CFC expects the value of work done to drop again this year to $869.89 million.
Though there are a few projects in the pipeline, the dollar values involved are not huge and these will drive moderate growth at best. For this reason, the CFC does not believe that activity will hit the $1 billion mark until 2013/14.
These projects include a new Deakin/Epworth Private Hospital at Waurn Ponds as well as planned redevelopments of Box Hill Hospital and Bendigo Hospital. Work at both Waurn Ponds and Box Hill is scheduled to commence later this year; that at Bendigo will not start until late 2012.
Queensland
Whilst overall conditions in the Queensland the construction industry are weak, the healthcare sector is tracking along nicely.
Buoyed by work on the $1.76 billion Gold Coast University Hospital, combined activity on health and aged care facilities increased by 54.58% last year to $998.6 million. Whilst aged care by itself declined almost 30%, this was more than offset by an almost doubling in activity within the core healthcare sector.
Despite work having commenced in March on a $1.28 billion children’s hospital in South Brisbane, the CFC is predicting a quiet year in 2011, with overall activity dropping back to $774.92 million.
Nevertheless, the forecaster does expect an uptick toward the end of the year and strong activity going into 2012 as work on the Gold Coast Private Hospital in Southport adds to that of other projects referred to above. In 2012/13, the forecaster says, activity will peak at $1.114 billion. Even after work on the Gold Coast University Hospital finishes late next year, the anticipated start of the Sunshine Coast University Hospital at Kawana Waters is expected to pick up some of the slack.
From 2013/14 onward, however, the CFC sees activity flattening out as work on some of these projects winds down.
South Australia
South Australia, too, is chugging along well.
The combined value of work on health and aged care facilities amounted to $256.6 million in 2010 – up 15.48% on the equivalent value in 2009.
Buoyed by work on a $200 million health and medical research facility next to the site where the new $1.7 billion Royal Adelaide Hospital is set to be built, activity in the core healthcare sector surged almost 80% to $196.9 million. That on aged care facilities plummeted to $59.7 million from $111.3 million in 2009.
With work on the new hospital starting in June, the good times are set to roll on. Although the CFC expects the combined value of health and aged care work to drop back to $216.48 million in 2011, the forecaster is tipping strong activity in the second half of the year.
By financial year 2012/13, the CFC believes that activity will reach $259.65 million, and will increase steadily thereon after. At that level, the value of work may not be much higher than that of calendar 2010, but in historic terms (compared with say, $123.98 million in 2005/06), it will still represent a strong performance.
Tasmania
Recent news that state and federal governments have committed funds for the $565 million upgrade to the Royal Hobart Hospital has provided a significant boost to the sector.
In 2010, the combined value of activity in health and aged care amounted to $47.9 million. Although small, this is well above the $29.5 million recorded in 2009.
Going forward, the CFC sees a further pickup in activity late in 2011 as work on the hospital kicks into gear. Work associated with the $50 million second stage of the UTAS Medical Science Precinct in Hobart should also help things along.
In calendar 2011, the CFC expects a further rise in activity to $65.7 million, almost two and a half times the value of work done in 2009. Beyond that, the forecaster expects activity levels to remain high, with the value of work done reaching almost $90 million by 2013/14.
Northern Territory
Activity is flat in the Northern Territory
At $33.3 million, the combined value of work done in health and aged care in the territory last year was virtually unchanged from the previous year.
Going forward, the CFC expects more of the same in 2011 ($33.2 million) followed by reasonable growth thereon after, with activity reaching almost $60 million by financial year 2013/14.
The only project on the horizon which has any significance relates to the health component of a proposed $300 million prison and mental health unit at Holtze, construction with regard to which is expected to commence in the 2011/12 financial year.
