It has been a game of two halves for the healthcare property construction market, which has been hit by a significant dearth of contact awards, but is being bolstered by a rise in planning approvals, signalling a likely turnaround in fortunes.

According to Glenigan’s latest Construction Review, which reflects construction activity across all key sectors in the three months to the end of February 2024, main contract awards within the health sector decreased both on last year and the previous three months.

More positively, though, detailed planning approvals grew on the preceding quarter and compared to a year ago, providing a boost to the development pipeline.

Peaks and troughs

Adding up to £770m, underlying health work starting on site (less than £100m in value) during the three months to February grew 24% against the preceding three months on a seasonally-adjusted (SA) basis to stand 19% up against the previous year.

But major projects (£100m or more) starting on site totalled £105m, a 77% decline against the previous quarter and 11% lower than last year.

Overall, health starts slipped back 28% against the previous quarter, but increased 14% on a year ago, totalling £875m.

Totalling £732m, health main contract awards were down 8% against the preceding three months and 38% down against a year ago.

Major projects totalled £120m, up on the preceding three months where there were no major projects, but down 73% against the previous year.

Underlying contract awards experienced a poor performance,

decreasing 29% against the preceding three months (SA) to stand 17% down against the previous year.

But detailed planning approvals, totalling £1.5bn, increased 13% against the preceding quarter and grew 31% on the previous year. And major project approvals, totalling £477m, slipped back 22%

against the previous quarter, but increased 298% against last year.

Underlying approvals, at £1.1bn, experienced a 22% increase (SA) compared with the preceding three months to stand 1% up on a year ago.

 

Types of project

Hospitals accounted for 44% of health work starting on site during the three months to February, with the value having increased 16% against the previous year’s levels to total £276m.

Accounting for 23% of health projects starting onsite, dental, health, and veterinary centres tripled on a year ago to total £198m.

And nursing home project starts, accounting for 16% of the sector, grew 4% compared with the previous year to total £140m.

In contrast, day centres slipped back 59% to total just £1m, accounting for less than 1% of health starts during the period.

Regional activity

Totalling £201m, the East of England was the most-active region for health project starts during the three months to February, having more than doubled against the previous year to account for 23% of sector starts.

At £154m, the East Midlands accounted for an 18% share. The value of the projects starting onsite in the region also jumped 178% compared with last year’s levels, mainly thanks to the £105m National Rehabilitation Centre development in Loughborough.

Health starts in the South West accounted for 14% and increased 22% compared with the previous year’s levels, totalling £123m; while

Yorkshire and the Humber also experienced a strong period in health starts, having grown 158% on a year ago to total £82m.

In contrast, accounting for a 16% share, starts in the South East fell 35% against the previous year to total £142m.

For detailed planning approvals, London was the most-active region, with a total value of £414m, having increased more than tenfold on a year ago to account for 26% of the health sector.

This growth was boosted by the £250m Whitechapel Life Sciences Cluster development.

And approvals in the East of England nearly tripled compared with the previous year to total £362m, a 23% share of health consents.

The big players

The report also provides details of the biggest contractors and clients in the sector, with Canary Wharf, Laiong O’Rourke and Kier Construction in the top three contractors; and the Department of Health, Ellison Oxford, and the Welsh Government leading the league table of clients.