Five real estate 
questions life 
sciences leaders 
should be asking

Maximize your financial performance to invest in R&D

November 18, 2020

During the COVID-19 pandemic, the life sciences industry has been hard at work, supplying vital therapies and jumpstarting the development of new vaccines. However, the pandemic has disrupted research and clinical trials at a time when the sector was already facing significant challenges.

To operate more efficiently and cost effectively, it’s time to leverage life sciences’ third largest expense — its real estate and facilities — to alleviate pressures and realize available capital.

Here are five questions life sciences professionals should consider to improve cash flow within their real estate portfolio and reveal resources to invest in research and development (R&D):

1.What’s the best way to view my entire portfolio and uncover hidden costs or excess space?

Gather as much intelligence as possible about your facilities so you can optimize their potential. Real estate portfolio analytics tools are invaluable for this because traditional accounting systems don’t capture all real estate data.

These tools can help you understand how your facilities are being used and provide a benchmark against portfolio and industry averages for a variety of individual facility costs on a per-square-foot basis. They also allow you to investigate outliers.

For example, a closer look at a building with above-average operating expenses may reveal the culprit is high energy consumption. Your facilities management (FM) team can determine how to reduce energy costs.

If your organization has experienced rapid growth through mergers and acquisitions, your portfolio may include facilities that are redundant, underutilized, or lacking alignment with your business goals. A portfolio analytics tool can pinpoint the issue.

When you understand how much space you have versus what space you actually need (and whether that space is where it should be), you can find opportunities to reshape your footprint and uncover hidden costs for greater efficiency.

2. With many employees still working from home, how can we recoup costs from our unused office space?

There is an obvious need to balance remote and in-person work, while simultaneously supporting business and employee needs. With a continued need for social distancing in the office, a more formal adoption of remote working would allow you to sublet or even formally reduce your overall real estate footprint, thereby lowering occupancy costs by 10% to 20%.

Remote work strategies can also attract and retain talent seeking flexibility in their schedules and work environment. If you experience a surge in employees who want to return to the workplace, short-term, on-demand flexible space provides one option without a long-term commitment. Incorporating a mix of remote working along with dedicated office space will allow you to foster the essential collaboration and sense of culture that makes your organization one-of-a-kind.

Finally, given the high cost of R&D facilities especially in the top geographic markets, moving your administrative functions to less expensive offices can also produce savings.

3. How can we optimize our energy management and adopt preventive maintenance?

Are your facilities as energy efficient as they could be? If you’re managing your lab, manufacturing, and office space internally, it’s likely you’re missing key opportunities to optimize. Simple measures such as installing LED lighting or upgrading your boiler can offer immediate energy savings.

For greater impact, you could strategically retrofit an older building and combine it with a smart building management platform. Smart building systems self-adjust continuously in response to occupancy, creating a more consistent and comfortable office temperature as well as higher indoor air quality. Those moves can reduce energy costs by 10% to 15% and pay for themselves in less than two years.

Partnering with a real estate service provider can help significantly improve productivity, organizational agility and facility quality – while also reducing costs. Experienced FM service providers bring a wealth of knowledge concerning efficient processes, next gen compliance and innovative technologies. A leading provider will also offer best-in-class practices and cost-saving initiatives that have delivered results for other biotech, pharma and medical device companies.

Lastly, preventive maintenance can reduce future labor hours and the prohibitive costs of emergency repairs. Through this approach, the repair-or-replace decision is measured on real-world usage rather than an artificial calendar based on traditional maintenance practices. Using sophisticated technologies to measure vibration levels and wear-and-tear, preventive maintenance extends the life of costly equipment while also avoiding sudden failures.

4. What creative strategies can we implement to increase available capital and manage construction projects?

It's not always clear which projects should take priority over others. Tapping variable capital project or program management services provides clear direction and flexibility without the fixed overhead cost of a large, in-house team.

While in-house teams support small-scale projects, an outsourced project manager can secure qualified contractors, monitor contracts, and manage complex projects seamlessly from start to finish. Partnering with external project managers are especially cost effective since they don’t require long-term commitment.

5. How can I maximize the amount of grants, tax incentives and funds to provide cost relief?

Many U.S. states and localities provide significant incentives to companies that create high-quality jobs and notable investments in the community. In some instances, these incentives can offset project costs by 25% or more if you qualify. Pursuing and implementing those incentives should be top of mind, parallel to any project you’re executing. In fact, life sciences projects are of particular interest to neighboring communities, especially since your economic and fiscal impacts can have a high “multiplier” effect.

For Life Sciences companies, the challenge can arise when optimizing these rewards. A strategic real estate provider can help uncover and pursue these opportunities in the proper jurisdiction, negotiate and execute in a timely fashion and navigate the often-complex administrative and compliance processes. By leveraging JLL’s proprietary tools, a growing biotech firm in the Northeast secured $19 million in incentives for their office headquarters, R&D and manufacturing space. The significant package was secured through grants and credits.

These are just a few of the strategies you can apply now to unlock savings and gain capital to invest in R&D.

Want more? Read 15 real estate strategies to reduce costs and fuel Life Sciences R&D