Part 1: This article is the first in a new series where we will explore the impact that the booming biotech market is having on hiring and talent strategies for companies and for biotech clusters.
Life science industry growth projections for the next decade mean the battle to acquire and retain the best talent will continue in 2020 and beyond, both here in the U.S. and globally. The many top biotech clusters across the U.S., including the BioHealth Capital Region (BHCR), will experience a new set of challenges as competition for talent becomes more fierce.
According to a recent CBRE report entitled “Markets Positioned for ‘Century of Biology’,” 2019 was a year of explosive growth for the biotech industry, fueled in part by the rapid emergence and proliferation of personalized medicine, including the burgeoning cell and gene therapy industries. The CBRE report calculates the life sciences sector is growing at its fastest pace since 2000, expanding 3.2% year-over-year
Rent for lab space in the Boston-Cambridge cluster, according to this same report, increased by double digits in 2019 and 1.9M square feet of lab space is currently under construction there. Another recent report by MassBio showed “…that the Massachusetts biopharma industry experienced the highest year-over-year employment growth in over a decade, adding over 4,300 new jobs from 2017 to 2018 for 6.4% growth.” More specifically, the report cites that biotech research & development (R&D) employment growth was nearly 50% over the past 10 years. Additionally, New York currently has 1.5M square feet of lab space under construction; Seattle, Houston, Austin and Denver were tagged by CBRE as emerging clusters. The next decade is ripe for disruption and more explosive change and growth.
The unprecedented growth in the top clusters,
such as Boston and the San Francisco Bay Area, has made them the most
competitive talent markets in the industry fraught with numerous hiring
challenges that we’ll explore in further detail below.
Second-tier markets are investing heavily to build their regional assets to provide a compelling alternative to the top markets, the BHCR being one of the most notable. The BHCR has been ranked as a top four (4) BioPharma cluster by GEN News, and a top-five (5) Life Science Cluster in a 2019 report by JLL that noted the region’s VC funding, employment growth, and real estate fundamentals as its core strengths. According to JLL the region has 10.3 million square feet of life science real estate inventory, 5.3% vacancy and an attractive $25.56 per square foot cost that is attracting numerous new companies to the region.
The BHCR is experiencing a rapid growth trend above some of the other second-tier clusters, particularly in the cell and gene therapy space. Vigene Biosciences just opened a brand new gene therapy manufacturing facility in Rockville, adding 40 new employees in 2019 and projecting another 60 in 2020 Kite Pharma is building a cell manufacturing facility in Frederick County, Maryland where it is expected to hire hundreds of new employees; and Catalent’s Paragon Gene Therapy has been growing by more than 150 people per year since 2018 and is continuing that trend now that they are part of Catalent. Catelent acquired Paragon for $1.2B after the completion of a new 150,000 square foot GMP gene therapy manufacturing facility near Baltimore.
Other success stories include Viela Bio’s $150M IPO. And companies like American Gene Technologies, Adaptive Phage Therapeutics, REGENXBIO, Rooster Bio and other emerging organizations, including promising startups, continue to secure funding and reach new milestones. All across the region, there is growth in the market.
“The type of growth we are seeing in the market is amazing because it signals that more life-saving medicines are on their way to the patients that need them. But it also comes with new challenges that many companies and the supporting ecosystem organizations like the universities and economic development groups haven’t faced before,” shared Chris Frew, CEO of Workforce Genetics, one of the BHCR’s premier Life Science recruiting and employer branding agencies. Working with companies more intimately on these challenges has given Frew a unique perspective on the real impact that a booming biotech market has on hiring.
“The BHCR, in particular, is poised for tremendous growth resulting in what our projections show to be more than 2,000 new jobs that companies hope to hire for in the next 24 months,” shared Frew. “This is why the issue of ‘talent’ has become the number one topic of concern for managers at all levels, from the board room to the lab floor, and many companies don’t feel that they have a confident strategy in place to address these issues.”
Regional Growth Really Means for Hiring
Continued growth means that talent recruiting,
acquisition and retention will remain a major challenge among companies
competing for the skilled workforce required to fuel and sustain growth in the
next decade. Workforce and talent issues were a hot button topic throughout
2019 and will continue to be a flashpoint for companies in the region. The BHRC
is globally renowned for its highly educated and highly skilled talent pool;
however, as the region continues to grow at a rapid pace, talent-related
challenges will be exacerbated.
Here are six significant talent challenges
that companies will face in 2020 as the industry continues to experience a
- Poaching: Companies of all sizes will experience greater competition for regional talent which will increase the amount of poaching of employees from neighboring companies. , The biggest issue with the increase of poaching is that it signals that new talent isn’t being added to the market — it’s just changing hands. The cluster doesn’t actually grow, because new job openings aren’t actually being filled, they are just shifting from one company to the next. Poaching is also a big factor that leads to many of the other challenges listed below.
- Job Hopping: The frequency that employees change companies will also increase, which will reduce the time that skilled, experienced employees remain at a company, limiting the impact they can have. This type of environment not only costs companies more money but it stunts overall efficiencies that they can achieve because they are constantly recruiting, hiring and training for the same roles.
- Compensation inflation: The battle for talent will also drive up wages, bonuses and overall compensation package value as demand continues to grow, poaching increases and the supply continues to shrink. Hiring and retaining your employees will become much more costly as the bigger, better-funded companies inflate their compensations to win over the talent they need to grow and make it even harder for the smaller companies to succeed. One only has to look to Boston or the Bay Area to see how this dangerous cycle results in a higher cost of doing business that touches everything from rent prices and facility costs to company operating costs and the rollover into higher costs for the hundred of products and services companies need to succeed.
- Relocation: Increased competition for talent will force BHCR companies to recruit talent from other biotech clusters and be more open to remote and more decentralized work environments. Many companies have survived with a predominantly regional recruiting strategy and will have to rethink their hiring models. Many will also have to consider remote work opportunities for their employees. Clusters that can collectively articulate and market a more compelling story that showcases their region as an ideal location for relocation will be in a better position to attract talent.
- Talent Development: The increased demand for talent combined with low unemployment, a growing skills gap, a retiring baby-boomer population and an industry growing on the foundation of rapidly evolving and novel technologies will cause almost every company to rethink its talent development strategy. Companies simply will not be able to meet their workforce requirements without better, more proactive, strategies for workforce development, training and re-deployment of existing employees.
- Small Business Squeeze: As all of these factors begin to compound within a regional cluster, many of the businesses will have the financial resources and market position to respond and remain competitive. However, many will not. Your small, privately held biotechs and contract labs, nonprofits and early-stage or slower-growth startups simply won’t be able to attract the talent they need to survive. The weight of it all will cause many companies to eek along for a time until they are forced to seek a strategic acquisition or fold and go out of business. Since small businesses and startups are so crucial to an innovation economy, this can have a detrimental impact in the long run.
These current and future workforce issues require solutions built around recruiting, acquisition and retention strategies that benefit both individual companies and the region as a whole. It also means that the major ecosystem support organizations like Universities, incubators, Economic Development Agencies, and Associations all need to look towards new, and more proactive solutions to solve these talent challenges. Doing things the way they have always been done simply won’t work anymore.
“The companies and regional clusters who can best solve these challenges will come out on top,” predicts Frew. “In the new biotech economy, ‘talent’ has become every company’s greatest asset.”
Stay tuned as we continue to explore Hiring
During a Biotech Boom in Part 2 of this series.
Steve has over 20 years experience in copywriting, developing brand messaging and creating marketing strategies across a wide range of industries, including the biopharmaceutical, senior living, commercial real estate, IT and renewable energy sectors, among others. He is currently the Principal/Owner of StoryCore, a Frederick, Maryland-based content creation and execution consultancy focused on telling the unique stories of Maryland organizations.