Given that the cost of developing and commercializing a new medicine or device can cost billions, the life sciences industry historically has not viewed real estate as a major cost center. However, many organizations now recognize that inefficient real estate can reduce their return on investment, while smart location decisions create value. They’re focusing on strategic investments that directly add value, such as state-of-the-art laboratory spaces or revenue-producing manufacturing facilities.

At the same time, many organizations are taking a closer look at their underutilized administrative space to optimize their real estate portfolios. Many are exiting and consolidating administrative space, directing the savings to workplace improvements or the core scientific mission.

With increasing pressure to uncover the next blockbuster treatment, many biopharmaceutical and medical device companies are outsourcing real estate and facilities management to become more agile and sharpen their focus on core scientific functions. 

Centralized facilities procurement and smart energy management strategies, for example, reduce operating expenses. Furthermore, a facility management provider specializing in life sciences will use next-generation building and equipment maintenance practices. Such strategies prevent research and production disruptions while reducing capital expenses by extending equipment life. In addition, an outsourcing partner can help create productive workplaces that attract and retain talent — and inspire and support employees bringing new products to market.

It’s important to select your real estate landlord or operating partner wisely. They must have deep technical expertise to provide a best-in-class and resilient environment that empowers you to meet your scientific mission. A strategic relationship will create flexibility to meet the demands of a rapidly changing market and your company’s growth. 

Creating a proactive facilities management strategy can ensure your real estate portfolio is as efficient as possible and can even present an advantage during M&A. As large biopharmaceutical companies acquire emerging innovators, an integrated facilities management partner can quickly add resources to meet the tight due diligence timelines. 

As life sciences organizations rethink their domestic and global footprints, they are using sophisticated location analytics tools to manage the cost structure of their real estate. At the global level, occupiers and investors alike are diversifying and optimizing their real estate footprints in response to talent availability, maturing markets, and greater business and research specialization. 

Using today’s tools, a biopharmaceutical company can review its global portfolio of sites, identify facilities with pending lease expirations and determine whether it makes sense to exit a particular market or country in favor of another. For example, the current slack in venture capital funding has created tenant-friendly conditions for laboratory space in some top life sciences clusters, creating opportunities not available five years ago. 

Location analytics also can help an organization at different stages. If the company is focused on revenue growth, for example, it will need sales and potentially manufacturing locations in the largest economies, such as the United States, Brazil, Western Europe, China and India. A company prioritizing margin preservation, meanwhile, would benefit from manufacturing sites in lower-cost countries, such as Mexico, Colombia, Eastern Europe or Southeast Asia. Innovators and mature companies seeking potential acquisition targets might look to life sciences and technology ecosystems in North America, Western Europe, the Nordic countries, Japan or South Korea. 

One of the most important decisions a life sciences real estate leader must make is when — and where — to build or buy real estate, and when to outsource to service providers like contract research organizations (CROs) or contract development manufacturing organizations (CDMOs). The complex decision requires analyzing internal and external factors and the economics of a real estate portfolio. 

This strategic conversation is most effective when companies take an integrated approach, considering business and scientific goals, key performance indicators and opportunities in the real estate market. JLL’s enterprise-level strategy services can help biopharma companies of all sizes create a path forward as they wrestle with making the right real estate environment available for today’s operations and the future.