Life Sciences Firms Look To Bring Manufacturing Stateside Amid Supply Chain Woes

The COVID-19 pandemic has underscored the need to bring life sciences manufacturing back to the United States, according to one industry insider. 

Domestic manufacturing is “a very, very big investment that the tenant has to make in addition to what the landlord is providing,” broker Ted Jacobs told CBRE’s Spencer Levy on a recent podcast.  

“We are seeing a lot of companies due to supply chain issues do a national search to build out a new manufacturing plant. A lot of those transactions happened last year,” Jacobs, who is based in San Diego, said. “I would say it slowed down just a little bit at the start of ‘22, but there’s definitely a need to have a better supply chain and have in the United States and control the workforce a bit more as well.”

Levy notes that the life science space, and particularly R&D is small in the United States compared to other regions. But as demand has skyrocketed for life sciences space, valuations have also shot up. 

Life science companies sought nearly 24 million square feet of new real estate in the third quarter alone, according to CBRE research. That exceeds the amount of lab space under spec construction by nearly 2.8 million sq. ft. 

“Life sciences labs quickly are becoming a highly sought-after property type for both tenants and investors,” said Ian Anderson, CBRE’s Americas Head of Office Research. “This intense demand for lab space is the natural result of a global push for new medicines begetting strong funding and hiring in the life sciences sector.”

And Tim Schoen, CEO of BioMed Realty, said that as inflation has spiked, “people have really started to question their supply chain.”

“It’s a great thing, I think, for the United States as we bring manufacturing back from overseas and put it more regionally…it’s definitely a demand driver for the U.S. and folks are thinking about that,” Schoen said, I know we’ve thought about it as we’re building buildings and we do have an international supply chain, but we did source more materials domestically. I know in the life science industry, folks are thinking about that.”

Schoen also said he thinks that manufacturing in the space needs to be a half hour or so from big hubs like Cambridge, San Diego, and San Francisco. 

“I think those companies probably have a wider swath of the United States to look at where they would want to put manufacturing based on the talent base in the labor pools and things like that,” he noted.