2018 and beyond: Medical device companies adopt new real estate strategies to deliver targeted therapies

JLL anticipates the need for collaboration and operational agility will drive workplace, real estate and facilities decisions

CHICAGO, Jan. 3, 2018 — Once designed for the masses, medical devices and biopharmaceutical medicines are converging in the quest for personalized, targeted therapies. In 2018, device companies will continue to explore new workplaces and operating models to bring innovative combination products to market. The need for collaboration and operational agility will require medical device companies to adopt new approaches to their real estate and facilities strategies, according to JLL's Life Sciences experts.

"Innovations such as nanotechnology and the Internet of Things are creating exciting new opportunities for medical device companies—yet operating pressures continue to grow," said Roger Humphrey, Executive Managing Director and leader of JLL's Life Sciences group. "To succeed, medical device innovators must grapple with delivering innovations more quickly and optimizing agility as their business models evolve."

Five medical device trends to watch in 2018 and beyond

Major trends are transforming how medical device companies create, manufacture and distribute their innovations—and driving real estate and facilities decisions. JLL has pinpointed five trends poised to shape the medical device industry in 2018 and beyond:

1)     Mergers and acquisitions (M&A) will continue at a rapid pace, and real estate will play a growing role. M&A deal volume declined year-over-year in 2017, but deal value rose to $62.4 billion by early December 2017—a significant increase over the $46 billion deal value in 2016, according to Pitchbook data. Real estate will continue to play a growing role in helping companies realize the full potential of an M&A strategy. In real estate terms, an M&A transaction may provide an opportunity to reduce costs by consolidating facilities, or to gain competitive advantage if an acquired company has a state-of-the-art lab near valuable research talent or a production facility near top customers.

"M&A, or partnering, is the path to success for many medical devices companies," said Humphrey. "But a company has to get real estate to the table during M&A discussions if it wants to quickly execute its operating strategy following a transaction."

2)     More medical device companies will outsource non-core functions, including corporate real estate. Many medical device companies are accustomed to outsourcing clinical trials, manufacturing or distribution. JLL experts anticipate increased outsourcing of support functions, including corporate real estate management, as medical device companies seek to shed expenses and increase agility.

"Outsourced corporate real estate management not only can reduce real estate and facilities costs, but also deliver agility," said Humphrey. "A real estate service provider can help a medical device company quickly pivot to a new strategy and establish engaging workplaces and productive facilities based on real estate-specific data and insights."

3)     Location decisions will appeal to the next generation of talent. Historically, medical device companies have not targeted their location decisions near the next generation of talent in major life sciences clusters. However, the need for continued innovation and talent recruitment is changing the location equation.

"Some medical device companies are seeking locations in or near the heart of the life sciences hotbeds like San Francisco and Boston," said Humphrey. "These locations offer not only access to top research and data-analytics talent, but also to the urban lifestyle amenities that appeal to Millennials."   

4)     Emerging innovations are influencing how and where medical devices are manufactured. As companies evaluate how nanotechnology, artificial intelligence and the Internet of Things change their business models, they'll also need to rethink their real estate and facilities strategies. Manufacturers will face competitive pressure to adopt the latest automated equipment and technology and ensure that facility management is equipped to maintain a sophisticated production environment. Low-cost locations have historically been prioritized, but now facilities near target customers are taking precedence.

5)     The workplace will be essential in the war for talent and the quest for innovation. Following the lead of technology companies, forward-thinking medical device companies are exploring new workplace concepts that improve employee well-being and, ideally, collaboration and innovation. An engaging and inspiring workplace can not only attract, but also retain top talent.  

"Major shifts in the healthcare environment and the medical device industry mean it's no longer 'business as usual' where real estate is concerned. Forward-looking medical device companies are going to explore how a fresh, data-driven approach to managing their facilities will support their business strategies," concluded Humphrey.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the third quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. As of September 30, 2017, LaSalle Investment Management had $59.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.