JLL Life Sciences Outlook Puerto Rico

Life Sciences Outlook
Puerto Rico | 2015
Puerto Rico
Puerto Rico has historically been a key manufacturing location for
large biopharmaceutical (biopharma) firms, thanks to lower labor
costs and rental rates compared to the United States. Nearly all
major life sciences firms have a presence on the island.
Aguadilla
Arecibo
The economic downturn and the end of some influential tax
incentives on the island have prompted some large biopharma
companies to relocate to the mainland of Central and South
America. However, we expect mid-sized biopharma firms to
stay put due to the benefit of existing infrastructure.
San Juan
Bayamón
Carolina
Mayagüez
Fajardo
Caguas
Ponce
Cabo Rojo
Yauco
Barceloneta
Barceloneta is the main pharmaceutical cluster in Puerto Rico due to its abundant, cheap land and excellent highway access. Located about 45
miles from San Juan, the largest pharmaceutical players who have operations on the island, such as Merck, Abbot and Pfizer, are located here.
This concentration attracts other small and mid-sized firms interested in capitalizing on that developed infrastructure.
Carolina
Centrally located and close to the airport, Carolina has higher land prices than the other clusters. It is a hub for agricultural distribution on the island.
Cataño
This is the oldest industrial submarket in Puerto Rico. It is located inside the city near the main ports and consequently functions as a dry port
location for products moving in and out of the country.
JLL | Puerto Rico | Life Science Outlook | Fall 2015
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Manufacturing composes
almost 50.0 percent of Puerto
Rico’s GDP. Of this, more than
half of all manufacturing is
attributed to the pharmaceutical
industry. Despite an
overwhelming decline in Puerto
Rico’s economy, the number of
life sciences establishments has
increased, driven by this strong
manufacturing sector.
Percent change in establishments YoY
8.0%
6.0%
4.0%
2.0%
0.0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
-2.0%
-4.0%
-6.0%
Puerto Rico is home to 49 FDA
approved pharmaceutical plants,
manufacturing two dozen
different kinds of
pharmaceuticals. One driver of
the manufacturing industry in
Puerto Rico is labor costshourly salaries in manufacturing
average 65.0 to 80.0 percent of
those in the U.S. The
government also provides tax
incentives for firms looking to
locate in this region.
Life sciences employment composition
Pharma & Medicine MFG
Electromedical Instrument MFG
non-lab
using
Medical Equipment & Supplies
MFG
Testing Laboratories
lab
using
Total unemployment and unemployment rate- Puerto Rico 2012 to 2015
18.0%
unemployment rate
unemployment
200,000
180,000
14.0%
160,000
140,000
12.0%
120,000
10.0%
100,000
8.0%
80,000
6.0%
60,000
4.0%
40,000
2.0%
20,000
0.0%
0
2012
2013
2014
Total unemployed
% unemployed
16.0%
R&D
Medical & Diagnostic Laboratories
Employment in Puerto Rico has
struggled in the midst of a
recession. The unemployment
rate is 11.4 percent. The debt is
also far above the U.S. average
as Puerto Rico struggles to
maintain a high GDP. However,
there is a bright spot in the
region’s economy- its industrial
sector. There are opportunities
for life sciences firms looking for
cheap, well-equipped industrial
space. Most major
biopharmaceutical firms have
manufacturing locations on
the island.
2015
JLL | Puerto Rico | Life Science Outlook | Fall 2015
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Tax incentives will impact demand
• The pharmaceutical industry in Puerto Rico is responsible for nearly
18,000 jobs and 50.0 percent of the island’s exports. The industry
pays approximately $3.0 billion in annual corporate taxes and has
comprised about 25.0 percent of Puerto Rico’s GDP for the past
40 years. The key challenges facing this industry are the
dampening effects of a slow U.S. economy and the high costs of
energy and transportation.
• Puerto Rico is also one of the top jurisdictions concerning production
volume in the biotechnological sector, one of top five jurisdictions
concerning production volume in the pharmaceutical sector and one
of the top 10 jurisdictions with regard to production volume in the
medical device sector. The island has well-developed manufacturing
infrastructure as a result, continually attracting new firms interested in
new production sites with access to Central and South America.
• Industrial development in Puerto Rico’s pharmaceutical sector is
organic and driven by the private sector, with minimal state
intervention aside from policies drafted to generate incentives for the
private sector. Therefore, the boundaries of industrial zones are often
ambiguous and future development of these areas is unpredictable.
• Biopharma in Puerto Rico represented approximately $2.87 billion in
sales in 2013, with over 66.0 percent of manufacturing exports, more
than 30.0 percent of imports and 79.0 percent of corporate tax
revenue. This is about 25.0 percent of the Puerto Rican economy
and 10.0 percent of private employment.
• The lab and industrial markets in Puerto Rico will be influenced in the
years to come by the Economic Incentives for the Development of
Puerto Rico Act. This law allows for a wide array of tax incentives
and credits that enable local and foreign companies to enjoy the
benefits of operating within a U.S. jurisdiction, while taking advantage
of a foreign tax structure.
• Amgen has the world’s largest manufacturing facility in Juncos, in the
eastern central region of the island.
•
Due to the minimal wage policies and the repeal of the Section 936
tax credit, this sector continues to lose its competitiveness to
other emerging Latin American producers such as Costa Rica on a
cost basis.
• More than 50.0 percent of the world's leading pharmaceutical
companies have operations in Puerto Rico, and 11 of the top 20
prescription medications sold in the United Sates are manufactured
on the island.
Barceloneta is the primary pharma cluster in Puerto Rico, with many of the largest companies in one location.
JLL | Puerto Rico| Life Science Outlook | Fall 2015
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For more information, please contact:
Scott Figler
Consultant
Colombia
[email protected]
Dana Westgren
Research Analyst
Americas
+1 312-228-2867
[email protected]
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