“The growing sector is having a significant positive impact on the economy, driving both temporary and permanent employment as increased construction creates opportunities,” says the report, written by Allison P. Wilson-Maher SVP, Healthcare and Sean Coghlan, market research analyst.

The metro area has 41 health systems and 112 hospitals, and should see both expansions and modernization of existing facilities, as well as new construction.

“The strong presence of ‘eds and meds’ has proven a stabilizing factor during economic downturns,” the report says. “Given outdated facilities, improving capital markets and aging boomers, hospitals are evaluating facilities, focusing on enhancing both access and quality of care for end consumers,” the report says.

Current plans will result in 10 million square feet of new and renovated facilities. Some 1.7 million square feet and 800,000 square feet of renovations are planned over the next five years, including Main Line Health’s $529 million expansion and renovation to be complete by summer 2013. BayHealth’s Milford (Del.) Memorial is finalizing plans to replace its campus, with construction to begin in 2014.

More construction activity should result from mergers and acquisitions among smaller healthcare operators, such as the affiliation of the Temple University Health System and Fox Chase Cancer Center, and the merger of South Jersey Healthcare and Underood-Memorial Hospital in Woodbury, NJ, the report adds.

“Upon completion, many of these merged systems are looking to renovations, dispositions, monetizations and sale-leasebacks to cut real estate costs and facilitate future flexibility,” the report says.

Renovations are just part of the activity. Health systems are looking to greenfield development, including St. Luke’s 130,000 square foot Anderson Campus Community Hospital in Bethlehem, Pennsylvania’s first non-replacement hospital in 40 years. A medical school is planned for its surrounding campus. Regional plans also call for more than 344,000 square feet of new emergency department space by 2014, including projects at Aria Health’s Frankford Hospital and Christiana (DE) Health System’s Wilmington Hospital. And more than 4.1 million square feet of new outpatient space will be delivered by 2016, including the $72 million Penn Medicine at Washington Square, a 153,000-square foot ambulatory care center in Philadelphia.

But all this development must be carefully planned and coordinated, the report notes.

“Bifurcated by location and financial status, health systems face central portfolio decisions as the strong get stronger and profit-constrained are tested—contributing to future upticks in merger and acquisition activity,” the report says. “However, while systems are making strategic land acquisitions for greenfield inpatient developments, conditions in the capital markets, federal funding mechanisms and zoning constraints will determine the timeline of continued inpatient development in 2013 and beyond.”