CONTACT US
Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}
062023LSPMarticlebannerv2 062023LSPMarticlemobilehero

Navigating Continued Challenges for Life Sciences Projects

Jason D'Orlando • 6/30/2023
Persistent challenges continue to impact costs, material lead times and project timelines across all life sciences projects.

The easing of stress on the global supply chain was largely expected to result in some slack in costs and project timelines for the construction sector. However, inflationary pressures, coupled with labor constraints, have led to critical material shortages and elevated costs.

Currently, Cushman & Wakefield projects in the life sciences sector are seeing material lead times that stretch from four weeks to nearly two years for generators, electrical switch gears, electrical panels, chillers, AHUs and elevators.

Current Lead Times for Select Materials

Material    Lead Time Material   Lead Time
Roofing   4-20 Weeks     Select Millwork   30-52 Weeks
Curtain Wall   14-28 Weeks   Switchgear   25-60 Weeks
Steel   17-30 Weeks   AHU   40-75 Weeks
RTUS   18-28 Weeks   Chillers   42-52 Weeks
Elevators   25-48 Weeks   Generators   72-95 Weeks

Electrical switchgear, which during normal production periods took four to six months, has seen delays double, and even triple in some cases, over the last year. Demand for electrical components has increased, as industries focus on electrical conversions to meet net-zero targets. This has placed a strain on the sector as manufacturers struggle to meet the high demand amid labor difficulties and certain raw material shortages.

A 2023 Cushman & Wakefield sentiment survey of over 70 general contractors (GCs) in the Americas showed some improved views on costs and timelines over 2022 levels. However, improved cost sentiment belies increasing labor costs in a labor-constrained market. Sentiment improvement is most likely a result of deceleration in construction and building costs, which are not increasing as steeply as they were in mid-2022. In April of 2022, building costs increased 16% on a year-over-year (YoY) basis; this slowed to 6.4% in April of 2023—still elevated but increasing at a slower pace.

 

However, the labor component of construction costs continues to increase, especially skilled labor, which increased 3% month-over-month (MoM) in April 2023. Non-residential construction employment continued to increase, growing 3.5% YoY as of April 2023, even as many open positions remain unfilled.

During the eight quarters preceding the pandemic, construction job openings outpaced quit rates. The pandemic accelerated this trend, leading to the widest gap between job openings and resignations during fourth quarter 2022. As of first quarter 2023, the gap closed slightly as the job openings rate receded but continues wider than historical averages. To attract talent to open positions, the sector has raised wages consistently and significantly over the last six quarters.

 

Project timelines have increasingly been delayed, not only due to the extended material lead times, but also because of the tightness in the labor market. Staffing a construction project with both common and skilled talent has become an additional challenge to the sector.

New development continues in the life sciences sector, despite persistent challenges, with over 33 million square feet (msf) of projects under construction—a 42% increase in activity YoY. Competition for materials and labor has increased significantly over the last year, causing some projects to be put on hold, delayed or scrapped altogether.

Demand for space will continue in the long term, given strong underlying fundamentals. Ongoing clinical trials, R&D and existing manufacturing will be augmented by onshoring efforts. U.S. government plans to bring the manufacturing of active pharmaceutical ingredients (API) back to the U.S. will impact demand for space. According to a 2020 report published by the Food and Drug Administration (FDA), 88% of APIs are manufactured overseas. Locating the bulk of the API supply chain outside of the U.S. has resulted in several drug shortages which have become more prevalent in the last decade. More recently, a shortage in cancer drugs, resulting from a plant closure in India where the drug is exclusively manufactured, led to patients receiving smaller doses of the lifesaving medication. 1

Moving manufacturing to the U.S. means more jobs and space will be required. However, the government needs to provide solutions to several hurdles, including costs to manufacture in the U.S. and the need for talent. The industry will need to be innovative in order to continue building new spaces or converting old ones, especially given the continuing material and labor constraints.

Mitigation Strategies

Persistently increasing delays means that planning and solutioning up front, and underwriting in the current industry, requires discipline and upfront investment. Strategies for starting a program and projecting accurately should include:

  • Third-party site due diligence at lease inception
  • Setting a strategic execution plan and accounting for true risk planning
  • Considering procurement and the risks of the economy
  • Locking down and securing materials with suppliers
  • Engaging vendors earlier

Life sciences construction, which is particularly vulnerable to backlogs in materials, will continue to experience delays in the following supplies:

  • AV and security systems: microchips, logic boards
  • HVAC equipment: AC units, air handlers, specialty equipment
  • Electrical: light fixtures, electrical switch gear (ATS, UPS, generators)
  • Some fabricated millwork
  • Elevators

Sound planning with clearly defined strategic goals allows for a more certain measure of true risk profile and a better prediction of a project’s cost and estimated time of delivery. Companies should also consider reverting back to design-bid-build contracting strategy in their project delivery plan, with an emphasis on identifying key long-lead items that must be procured before design is done—typically during early programming. This would help to alleviate the risk of trying to fast-track a project, while allowing the architecture engineering firm the ability to purchase long-lead equipment during the design phase.

Experienced project development teams make every effort to ensure delays caused by material and labor challenges are planned. In this current environment, however, project managers must be brought aboard early to revise timelines, reduce risk and deploy new tactics—all strategic efforts that will increase the likelihood of meeting a project’s budget, milestones and timelines.

Preprogramming continues to be key to running a successful and on-time project in 2023. Early material procurement and expediting the early-works package while still in the location analysis and concept planning phases saves time and prevents cost overruns.

 

Preprogramming and Site Due Diligence
To solve for risks in planning, Cushman & Wakefield project managers typically try to engage our partners during the preprogramming stage. Our early alignment directly reduces timelines and unforeseen cost impacts by up to 45%, compared to baseline on other programs where OPM services are brought in after programming and conceptual design.
Subscribe to Life Sciences Insights
Get the latest in Cushman & Wakefield's Life Sciences research and commentary.
Subscribe Learn More

Related insights

09.2024-life-sciences-update_web-card.jpg
Research

Life Sciences Update

Cushman & Wakefield’s 2024 life sciences market report covers national trends and dive deep into top global life sciences markets, for an in-depth look at this quickly changing industry. 
Sandy Romero • 9/17/2024
life sciences funding in view
Research

​​Life Sciences Funding in View​

Global life sciences venture capital funding has reverted to its pre-pandemic long-term trend.
Sandy Romero • 1/29/2024
Chicago-Life-Sciences-Landscape_Web-Card
Article

Chicago Life Sciences Next Frontier

Chicago is poised and prepared for life science’s next frontier. Driven by rich academic innovation in the areas where medicine meets engineering, the Chicago life science ecosystem has flourished in the last five years.
Jonathan Metzl • 6/6/2023

Related industries & Services

Life Sciences
Our life sciences real estate experts drive customized, dynamic solutions for investors, owners, developers and occupiers within the quickly evolving life sciences sector. 
Learn More
Healthcare
Our Healthcare clients have a unique advantage: a global network of experts that optimize portfolios to better support their healthcare missions and business objectives.
Learn More
Project & Development Services
Your real estate decisions go beyond space, cost and schedule. Our team will supply the expertise and data for effective decision-making and provide the best and most effective construction project delivery.
Learn More

Ready to talk?

Our professionals are ready to provide further details on this and many other topics.

With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on  Cookies

More Options
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS