Pharma companies to undertake more M&As, innovate building use to cut costs, says CB Richard Ellis

KUALA LUMPUR: More merger and acquisition (M&A) activities by several major pharmaceutical companies are anticipated following a slew of property asset consolidation and cost-cutting measures, according to a commercial real estate services firm.

Furthermore, site disposals following M&A activities in mature markets will take place while demand for manufacturing space in lower-cost economies such as Eastern Europe, India and China will increase as pharmaceutical companies move their production to these countries, said CB Richard Ellis Inc head of Life Sciences Nick Compton in a statement dated Nov 24.

He added that space efficiency will also be boosted through international workplace standards and unconventional working strategies.

“We found that the top 10 pharmaceutical companies occupy at least 430 million sq ft of office, manufacturing and specialist research space around the world, of which around 75% is owned. That’s one of the highest ownership ratios of any corporate sector and reveals a huge amount of potential to cut costs through consolidation, space efficiency strategies, disposal and relocation, ” he said.

However, about 60% of the companies surveyed do not have a structured property component in the M&A process, which is necessary in both mature and emerging markets to mitigate the cost of massive property portfolio consolidations, he added.

In addition, pharmaceutical companies are also striking up partnerships with newer entrepreneurial companies and making licensing deals with the owners of intellectual property (IP) in a bid to complete the product pipeline, Compton said.

Aside from streamlined operating and product development, another implication from these arrangements is a different approach to property, with remodeling of existing closed, single occupier campuses with laboratories predicted to increase, according to Compton.

“The creation of open, multi-occupied science parks will encourage open innovation and provide access for smaller enterprises in the sector,” said Compton.