Recruiting and Market Share Reshape Life Sciences Facilities and Locations

Where a biopharmaceutical company does business affects its profitability — as does how it manages its facilities and even where its non–customer-facing operations are located. In fact, facilities and real estate represent some of the biggest expenses for such companies. And yet, they are often overlooked. In today’s shifting global life-sciences landscape, site selection and management strategies are coming to the forefront as companies seek operating efficiencies, access to multidisciplinary talent, and cost-effective facilities. The following insights from JLL’s 2014 annual Global Corporate Real Estate Trends for the Life Sciences Sector reveal how these strategies are evolving.

Changing Types and Sizes of Facilities in Demand
More than a third of life-sciences companies anticipate reducing or consolidating their real-estate portfolios in the North American and European markets, according to JLL’s report. Nearly two-thirds plan to expand their footprints in China and nearly half in Brazil. Newly built “innovation cities” and incubator-type facilities are emerging and quickly claiming dominance over Asia’s rapidly growing life-science clusters. Massive research parks in those emerging global clusters support growth in R&D and attract global biopharmaceutical operations.

In mature markets, meanwhile, many of the largest companies already have consolidated their geographic footprints. Some enterprising brokers and investors are redeveloping the properties those companies have vacated into flexible, multiple-tenant facilities in which smaller companies can grow. The largest companies reshuffle their global operations and focus on reducing costs; small, midsized, and specialty companies are defining the industry’s future and shaping its real-estate and facilities landscape. Smaller companies are attracting significant investor attention in such clusters as San Diego and Boston in the United States, Montreal in Canada, Cambridge in the United Kingdom, and Basel in Switzerland. Incubator-type buildings offering flexible space options and shared laboratory services (e.g., inventory management and glass washing) are in high demand.

In both mature and emerging markets, companies continue to pay a premium for facilities near resources, talent, and leading research institutions. Janssen Canada, for example, has its headquarters in Toronto, Ontario — one of Canada’s more costly real estate markets — because there it can access research resources. That proximity enabled formation of Neuroscience Catalyst, an open-source research collaboration between Janssen, Johnson and Johnson Innovation Center (of California), and the University of Toronto’s Centre for Collaborative Drug Research.

Critical Skilled Management in Short Supply
For an industry in which regulatory compliance, cost-efficiency, and safety are of utmost importance, a shortage of facilities experts is becoming a serious problem. Skilled trade workers, engineers, and technicians are in short supply around the world and are the top three roles most difficult to fill, according to ManpowerGroup’s 2014 global talent shortage survey (www. manpowergroup.com/talent-shortage-explorer). Concurrently, the emergence of sophisticated manufacturing and storage regulatory requirements (along with attendant equipment safety and hazardous waste-management risks) have increased the need for highly skilled biopharmaceutical professionals. Those employees must follow an average of 1,250 standard operating procedures (SOPs) required by various regulatory agencies around the world. But companies focused on their core business activities often don’t invest in facilities training and recruitment. The US National Association of Manufacturers says that the more complex and automated a system is, the less training workers will generally receive for it — ultimately leading to less preventative maintenance, more emergency breakdowns, and less-skilled workers overall.

Facilities Management Outsourcing on the Rise
Advancements in facilities technology, increasing cost pressures, and staffing requirements have made facilities management services an increasingly attractive option, especially among midtier players tackling myriad compliance issues and needing to stay nimble. Biopharmaceutical companies are increasingly outsourcing “beyond the yellow line” facilities functions such as equipment maintenance, regulatory compliance, environmental and health safety, technology, critical environment, and other specialized areas. Compliance alone requires an average of 15,000 hours of labor per year. Violations can lead to massive penalties, so biopharmaceutical companies historically have managed their highly regulated environments themselves. But that practice is evolving. Service providers that can integrate specialized facility responsibilities with production equipment maintenance, repair, and operations (MRO) as well as laboratory supply management allow companies to take advantage of lower costs, increased service levels, and functional synergies. Such efforts can improve efficiencies and compliance but require continuous and meticulous execution.

Combined, these facilities trends represent opportunities for companies of all sizes to become more efficient, more profitable, and more competitive. Those that can quickly establish operations in the right places with the right facilities and talent will be best positioned to succeed in a hypercompetitive industry.

Roger Humphrey is executive managing director of the life- sciences group for JLL, 200 East Randolph Drive, Chicago, IL 60601; 1-908-698-1379; [email protected]. Complete findings of the cited report are online at www.jll.com/services/industries/life- sciences/global-cluster-report.