The life sciences industry has experienced major upheavals in recent years. The changing healthcare landscape, patent cliff, tighter regulations and pricing pressures have forced life sciences companies to reconsider their business models and revamp organizational structures. The changes in the sector have inevitably affected corporate real estate, demanding innovative solutions that can support overarching corporate strategy.
This report identifies three major trends for CRE in life sciences from JLL’s 2013 Global Corporate Real Estate Survey. It also discusses the evolution required for CRE teams to maximize their strategic value in the fast-changing life sciences industry.
Although the CRE function is quite well established in the life sciences sector, there is a notable disconnect between the CRE and the overall business strategy. The biggest factor contributing to the disconnect is a lack of communication with the C-suite. In fact, among all sectors, life sciences CRE is the least connected to the C-suite, with the majority of CRE executives reporting at the managerial level.
Given the limited connection with the C-suite, it is not surprising that a lack of sustained C-suite commitment represents a major challenge for CRE teams. More than half of the life sciences respondents reported that C-suite commitment was the key constraint hindering CRE from enhancing itself as a strategic value add to the organization, compared with less than a third in other sectors.
Major constraints hindering CRE from enhancing its strategic position
Question: In your opinion, what are the top two constraints that are hindering CRE from enhancing itself as a strategic value add to your organization?
As life sciences companies continue to transform, senior leadership expectations for optimized portfolios have increased exponentially. Demands related to portfolio efficiency, costs and flexibility are the most critical and are expressed to a higher degree in life sciences sector incompared to most other sectors.
Increasing senior leadership demands on CRE
Question: How are the demands of senior leadership/C-suite on the CRE team changing in the following areas? (% who responded that demands were increasing)
Net portfolio growth anticipated over the next three years (life sciences companies)
Question: Over the next three years, how will your portfolio evolve in each of the following regions?
The life sciences industry’s move to more profitable and faster growth models includes reorienting its geographical presence and focusing on opportunities in emerging markets. Life sciences companies are not only moving their production facilities to emerging markets, but also whole business units and R&D centers. The changes in life sciences real estate portfolios that follow are some of the most drastic among all industries.
Over a third of life sciences companies anticipate reducing or consolidating their real estate portfolios in European markets, such as the Netherlands, Italy and Spain. On the other hand, 63% and 48%, respectively, plan to increase their portfolios in China and Brazil). Russia is expected to see a 35% net portfolio growth.