Medtech and biomanufacturing fuel life sciences growth

CHICAGO, Dec. 6, 2023 – The medtech and biomanufacturing sectors are driving new growth in the life sciences industry. As a result, the key markets that house medtech and biomanufacturing clusters are flourishing, presenting new opportunities for commercial real estate investors and life sciences occupiers in places where science and innovation meet.

“The prospects and growth potential within the medtech and biomanufacturing sectors in relation to life sciences real estate are numerous,” said Travis McCready, Head of Life Sciences, Americas Markets, JLL. “Medical device and testing companies hold a prominent position within the life sciences industry, and biomanufacturing plays a crucial role in the lifecycle of therapeutic companies. Considering the substantial investments required and the crucial role of manufacturing operations in a company's success, it is crucial to carefully select locations and sites that offer long-term value and optimal utilization.”

The federal government is boosting the growth by investing heavily in medtech and biomanufacturing through the CHIPS and Science Act by designating 31 communities across the U.S. as Regional Innovation and Technology Hubs. Tech hubs advance innovative ideas like continuous flow manufacturing, provide cost effective ways to transform how drugs are manufactured, increase capacity and apply artificial intelligence and machine learnings into medtech development. Since the act was signed in August 2022, private companies have announced approximately $20 billion in biomanufacturing. These investment dollars are expected to expand the framework for scientific advancement in life sciences and create new markets for innovation.

The growth of the medtech and biomanufacturing sectors presents opportunities for investors and tenants in the laboratory real estate market. Investors can identify resilient submarkets with established clusters and high-quality inventory to capitalize on the demand for specialized lab spaces. Tenants, especially smaller companies, can negotiate economically favorable transactions and shorter lease commitments, leveraging the current market conditions to optimize their real estate strategies.

Strategic selection of long-term markets

New areas of opportunity in life sciences provides avenues for stablished medtech and biotech companies to strategically select long-term markets for research and development growth, and startups seeking to scale or smaller companies looking to expand, also have an advantage when it comes to site selection.

“Beyond the major clusters, several emerging markets across the United States offer unique advantages, including access to talent, lower costs and supportive local environments,” said Maddie Holmes, Senior Research Analyst, Life Sciences Industry Insight and Advisory, JLL. Startups can explore these alternative markets to establish their presence and tap into local resources.”

Understanding the specific requirements of medtech and biomanufacturing companies and catering to their needs are essential for capitalizing on this evolving market and creating a thriving life sciences ecosystem.

The evolution of medtech

The medtech sector encompasses medical devices, diagnostics and digital health solutions and increased healthcare spending, along with the rising demand for personalized medicine, have contributed to the sector's expansion. This growth has led to a surge in the need for specialized lab spaces for research, development and manufacturing in the U.S. and around the world.

Medtech companies require state-of-the-art lab facilities to conduct research and development activities as they strive to bring innovative devices and technologies to market. These companies often require specialized lab space equipped with cutting-edge equipment, cleanrooms and controlled environments. Moreover, medtech companies often collaborate with academic institutions, healthcare providers and other industry partners, driving the need for flexible and collaborative lab spaces that foster innovation and collaboration.

Key U.S. medtech markets

As highlighted in JLL’s recent 2023 Life Sciences Industry and Real Estate Perspective, Orange County, Calif.;  Minneapolis; the San Francisco Bay Area; Boston and Salt Lake City are among key markets that are thriving. These cities have established medtech clusters and robust ecosystems conducive to innovation and collaboration.

While Boston has the most aggregate medtech employment in its market at 40,433, Orange County has the highest concentration of medtech employment as a percentage of total (nonfarm) employment at 1.78%. Minneapolis quickly follows Boston and Orange County for the second highest employment at 32,074 and employment concentration at 1.71%, respectively.

San Diego is another market demonstrating strength in medtech; it comes in with the fifth highest employment, sixth densest employment concentration and third highest healthcare devices venture capital funding over the past five years, making it a well-rounded growth opportunity market. Additionally, Memphis, New Haven-Hartford, Boulder, Sacramento and Phoenix are markets to watch due to their medtech employment concentration and steady growth over the past five years.

The growing significance of biomanufacturing

Biomanufacturing, which involves the production of biologics and cell and gene therapies, is experiencing significant growth due to breakthroughs in biotechnology and increasing demand for advanced therapies. The biomanufacturing sector relies heavily on specialized lab spaces that adhere to strict regulatory requirements, including Current Good Manufacturing Practice (GMP), which seeks to eliminate risk of contamination as materials move through the manufacturing process.

“All life sciences manufacturing facilities require cGMP compliance, and best-in-class cGMP manufacturing facilities have stricter manufacturing application protocol and design qualifications than other manufacturing facilities,” said Kevin Wayer, President, Life Sciences, Work Dynamics Division, JLL. “Having a strong facilities maintenance program that includes quality and safety training for the technical workforce is more important than ever. It ensures not only a safe environment for employees but for the patients who use the products.”

Top U.S. biomanufacturing markets

The key biomanufacturing markets include Raleigh-Durham, Philadelphia, New Jersey, Boston and the San Francisco Bay Area. These regions have a strong presence of contract manufacturing organizations (CMOs), concentration of talent, research institutions and industry collaborations in the area, which drives the demand for lab real estate tailored to biomanufacturing needs.

New Jersey has the highest biomanufacturing employment, at 24,428, making up .8% of its total (nonfarm) employment. Whereas, Indianapolis has the highest concentration of medtech employment in its market, at 1.46%, only accounting for 15,371 employees. New York City has the most companies conducting ongoing phase 2 and 3 clinical trials – a lagging yet leading indicator for the need of biomanufacturing space.

Boulder, which is also a key medtech market, boasts a strong biomanufacturing employment concentration, at 1.08% of its employment. AGC Biologics, a global contract development and manufacturing organization (CDMO) out of Seattle, has made continuous bets on the biomanufacturing market in Boulder – in 2020, AGC acquired a large-scale biopharmaceutical facility with space for six 20,000-liter bioreactors, and since has continued to expand its footprint in the Boulder and Northwest Corridor area.

Other markets to watch include Greater DC and Baltimore, San Diego, Chicago and Miami. From 2018 to 2022, biomanufacturing employment grew, on average, 33% in these markets. They also have the fourth, fifth, sixth and seventh most existing CMO’s in their market today, respectively.  

The medtech and biomanufacturing sectors are driving demand for specialized lab space in key markets across the United States. The growth and innovation within these sectors present significant opportunities for investors, tenants and stakeholders in the commercial real estate industry.

JLL's vision is to reimagine the world of real estate, creating, finding, locating and operating safe and amazing spaces. JLL’s Life Sciences team of 3,000+ experienced professionals are a safe pair of hands to help biotechnology, pharmaceutical, medical devices organizations, investors and developers achieve their ambitions. JLL brings deep understanding of location analytics, project management, research advisory, financial incentives, transaction management, capital markets, real estate strategy and technology, facilities management, regulatory compliance and quality, and more. Our solutions help fuel innovation, enhance efficiency, improve financial performance and attract and retain top talent. Our team is trained and certified to operate within office and critical, regulated environments of lab and manufacturing space. To learn more, visit us.jll.com/lifesciences.

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