A changing cost landscape
Our Annual Life Sciences Construction Outlook highlights the growing pressure on real estate and construction teams to keep pace with surging rates of investment.
To take the pulse of the life sciences construction sector, we conducted an online poll which generated responses from ten of the world’s leading global life sciences companies.
80 percent of respondents agreed that current market conditions are ‘hot’, indicating a highly competitive market with limited contractor capacity and rising costs to deliver projects.
In North America, which has always boasted some of the world’s leading hubs for life sciences on the East and West Coasts, the competitive market conditions are seeing new hotspots emerge. Atlanta, Charlotte and Indianapolis, for example, have seen an acceleration in activity.
It’s a similar story in Europe where the traditional life sciences hubs in Switzerland, Germany and the UK continue to be very busy, while the investment spotlight is also being directed towards newer and fast-growing locations, notably Ireland.
86 percent of our survey respondents agree that tender and bid prices escalated in the sector at a higher rate in 2022 than in 2021. Rates data from our International Construction Market Survey (to be published in June 2023) also confirms this, showing that 64 percent of countries have seen costs rise based on our indices. In North America, the average construction cost inflation for 2022 was 10.6 percent. The same trend has materialised across the European region, where average cost inflation for 2022 was reported at 12.7 percent.
With such high inflation occurring over 2022, as well as easing in pandemic-induced global supply chain disruptions, construction cost inflation has likely peaked in most markets. However, costs will continue to be elevated in the near term.
of our survey respondents anticipate that costs will continue to increase over the coming year, albeit at a slower pace than seen over the past 12 months.
In the face of these ongoing cost pressures, overall demand shows no sign of weakening. Speed of delivery remains the overriding concern for the industry, however, cost efficiency is coming under increasing scrutiny with clients needing to ensure the price of investment meets the business case.
In order to develop facilities that meet expectations for higher standards in project performance, the industry has recognised that a business-as-usual approach won’t work. Increasingly, sector players are showing an openness to work together to find ways to embed more sophisticated delivery methods worldwide.
Life Sciences Benchmarking Club
Turner & Townsend manages an industry-leading benchmarking platform as part of its digital transformation programme to boost efficiency, enable knowledge transfer among peer companies, and improve overall cost and schedule performance on projects in the life sciences sector.
By combining the anonymised pooling of data amongst a membership-based forum with access to market intelligence through peer-to-peer knowledge share, the platform enables a deeper level of collaboration, data visibility and quality.
The benchmarking platform allows members to analyse up-to-date data on a granular level, from materials and labour to insurance and design development. Using this data, project costs can be compared and forecasted with greater certainty, allowing clients to make informed business decisions throughout a project’s design and build.
Key contacts: Edward Linford and India Albini, Digital Leads for the Life Sciences Benchmarking Club
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