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Jones Lang LaSalle’s 2012 Life Sciences Cluster Report shows Greater Boston, San Diego, Philadelphia and Raleigh-Durham rising in importance as industry hubs
CHICAGO, Jan. 25, 2013 – With a series of key brand-name drug patents set to expire in 2013, deadlines collectively referred to as the “patent cliff,” life sciences companies are bracing themselves for a revenue drop some estimate could reach $30 billion. One industry response to the cliff is the geographic reshuffling and right-sizing of the North American life sciences industry occurring in comparatively smaller metropolitan areas as these cities rise in industry influence. Jones Lang LaSalle’s (JLL) annual 2012 Life Sciences Cluster Report chronicles this shift in a ranking of industry clusters—areas in which life sciences intellectual capital, funding and facilities are concentrated. Cities that are rising in influence offer a workforce, academic community and public sector focused on R&D productivity and areas of opportunity within the sector, such as biologic biosimilar drug research and production. This year JLL ranked the top 10 U.S. markets for life sciences in 2012 compared with 2011, along with the following emerging trends:
In addition to the top 10 market ranking above, the 2012 Jones Lang LaSalle Life Sciences Cluster Report identifies and ranks a total of 21 U.S. cities according to weighted scores for total employment in high-tech research and hospital/medical fields; life science establishments; National Institutes of Health (NIH) funding; and venture capital funding. The top 10 list represents ‘established clusters;’ the report also covers emerging clusters including Chicago, Denver, Atlanta, central / southern Florida, and Indianapolis (also covered in the 2011 report. New emerging clusters added to the 21-city ranking in 2012 include: Westchester / New Haven, Ohio, Salt Lake City, Dallas/Fort Worth, Wisconsin and Michigan.
“Access to world-class research institutions, facilities and intellectual capital are priorities for R&D-focused organizations,” said Bill Barrett, JLL Executive Managing Director, Life Sciences. “Proximity to these resources continues to command a premium in terms of rents and facilities investments.”
Three key factors have helped both the established and emerging clusters to achieve success during rapidly changing times in the life sciences industry: middle-market growth, the need for access to innovation and the offering of economic incentive packages to fuel life sciences sector expansion.
Right-sizing and consolidation by multi-national pharmaceutical companies in the United States have led to opportunity for middle-market corporations, as many former single-institution research campuses are now thriving, multi-tenant life sciences centers. This transformation is benefitting clusters located outside the nation’s largest metropolitan areas, because they offer lower overall costs of occupancy, yet retain premium access to academic resources and an educated workforce. In the Midwest for example, the largest metropolitan area, Chicago, remains an emerging cluster while its smaller Midwestern counterpart, Minneapolis, is a top 10 cluster for the second year in a row.
In California, San Diego has risen from being the seventh to the second most-active U.S. cluster, leading the nation in life sciences employment and surpassing both San Francisco and Los Angeles in its ranking. San Diego recorded a staggering $13.8 billion in M&A activity in the last 12 months, including AstraZeneca’s acquisition of Ardea Biosciences, Hologic’s purchase of Gen-Probe and Bristol-Myers Squibb’s offer to acquire Amlyin Pharmaceuticals. While this type of consolidation could potentially leave empty space on the market, middle-market companies have driven a steadily increasing demand for space in life sciences-oriented facilities, keeping space occupied and rents stable.
Likewise on the East Coast, Raleigh-Durham leapt to fourth position from ninth, surpassing such Mid-Atlantic markets as Washington, D.C. Raleigh-Durham demonstrated large-scale growth and new development fueled by agro-technology companies Syngenta, BASF, Monsanto and Bayer CropScience. The latter, for example, recently opened a new $20 million research greenhouse. Similarly, Philadelphia’s institutions have fed the region’s 432,000 jobs and $20.2 billion in life sciences earnings, accounting for nearly 15 percent of the city’s economic activity.
The exception to this trend is Greater Boston, which continues to represent the center of the global life sciences industry, with more than 74,000 employees serving the pharmaceutical, biotechnology and medical device subsectors. Average asking rents for lab space in Cambridge, Boston’s R&D epicenter, have returned to peak levels of $54.61 per square foot.
The importance of access to a thriving and diverse community focused on innovation has never been greater. According to Deloitte’s 2012 The Future of the Life Sciences study, “Significant revenue growth is unlikely to be achieved organically, mergers and acquisitions will continue, and partnerships/alliances will emerge as an important means of revenue generation. Companies will need to leverage the fact that partnerships will be ubiquitous and may include cross-sector partnerships and collaborations with payers as well as academia.”
While not offering the critical mass of the established clusters, emerging U.S. life sciences concentrations are stepping up their economic development and public-private partnership activities to attract life sciences organizations.
“Certain emerging clusters have adopted the ‘if you build it, they will come’ mentality, combining targeted incentive packages, new facilities, economic development groups and public-private partnerships in concerted efforts to attract life sciences companies,” said Barrett. “These incentives are important as life sciences companies balance their need to be near world-class scientific institutions versus their need to manage facilities costs.”
Westchester/ New Haven (suburban New York City), central and southern Florida and Indianapolis are among those creating targeted incentive packages, newly constructed, state-of-the-art incubator centers and parks specialized for life sciences uses. The hope is that these clusters can provide leading research institutions and resources—but with real estate at a lower cost than in the leading clusters. For example, in 2012, with the opening of the Max Planck Florida Institute for Neuroscience, a Germany-based international research institution opened its doors for the first time in North America.
The complete findings of Jones Lang LaSalle’s 2012 Jones Lang LaSalle Life Sciences Cluster Report are available in a dedicated microsite available here: http://www.joneslanglasalle.com/Pages/Life-Sciences-Cluster-Report.aspx
A PDF of the report can be downloaded here: http://www.us.am.joneslanglasalle.com/UnitedStates/EN-US/Pages/ResearchDetails.aspx?ItemID=10401
Jones Lang LaSalle has a team of real estate and facility management experts dedicated to helping life sciences companies optimize and manage their real estate portfolios. The firm provides a comprehensive range of facilities management services to the life sciences community covering 70 million square feet of research, manufacturing and commercial space. Jones Lang LaSalle’s industry leading full-service platform includes: integrated facilities management, engineering and operations, energy and sustainability, transaction advisory services, lease administration, project management and a new platform for integrating laboratory services, Labwell.
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About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.