Sep 20, 2023 - Health

Medical devices a bright spot as demand for lab space shrinks

Data: JLL's Life Sciences Industry and Real Estate Perspective; Chart: Axios Visuals

Boston, Minneapolis-St. Paul and San Francisco are among the U.S. hubs where medical device industries are thriving, according to a new report from commercial real estate firm JLL.

Why it matters: While life sciences more broadly have seen shrinking demand for lab space amid a slowdown in investment and hiring, medical devices and medical technologies have emerged as a bright spot, JLL's Life Sciences Industry and Real Estate Perspective shows.

  • The hubs identified by JLL, however, have high concentrations of talent not seen in traditional research and development hubs, as well as healthy investments with long-term growth prospects, the firm said.

By the numbers: Between 2018-2022, San Francisco Bay Area health care devices and supplies companies captured roughly $17.5 billion in venture capital funding.

  • The industry employed more than 29,000 people in the region in 2022, with leading firms that include Intuitive Surgical and Agilent Technologies.
  • Boston-based firms pulled in $3.3 billion in VC funding during that same window and employed over 40,000 last year. Leading firms were Boston Scientific, Abiomed and Hologic.
  • Minneapolis-St. Paul firms received $1.9 billion in VC funding, with leading companies including Medtronic, Boston Scientific and 3M.
  • Firms in California's Orange County netted about $1.1 billion in VC dollars, and Salt Lake City companies received $528 million.

What they're saying: "Medical device and testing companies represent a huge swath of the life sciences landscape in the U.S.," Mark Bruso, a JLL research director, said in a statement.

  • The annual report also for the first time highlighted biomanufacturing hubs, pointing to Greater Boston, New Jersey, Philadelphia, Raleigh-Durham and the San Francisco Bay Area as U.S. leaders.

The big picture: There is a glut of life sciences real estate with soft demand for major lab spaces as companies face persisting concerns about volatility in the market, per the report.

  • At the end of 2021, demand for lab space across the top eight markets in the U.S. totaled more than 25 million square feet. By mid-2023, that had fallen to just over 10 million square feet.
  • "Small users, who have a critical need for bench space as opposed to mid-to-late-stage companies who can make do with their current situations, are the vast majority of users seeking space," the report reads.
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