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Growing medtech industry to alter real estate market – Finance and Commerce

Minnesota’s medical-technology (medtech) industry is broadening, bringing with it new real estate opportunities and challenges.

Panelists discussed the industry during a virtual event the Minnesota Commercial Real Estate Women, a local business network, held Wednesday. They identified an expanding need for coworking and shared lab spaces as companies continue with hybrid work models, as well as a need for new types of amenities medtech companies demand — all of which could change the business models of commercial real estate companies.

Minnesota’s two fastest growing industries are bioscience and manufacturing. “And medtech fits right squarely into those two categories,” said Terri Ulrick, a principal and director with St. Paul architect firm BWBR.

With companies planning their return to in-person work, many medtech companies are rethinking their physical space needs.

Personal assistance service tech company DUOS won’t have physical space for each employee and will instead likely operate out of a “hub” in Minneapolis, said Karl Ulfers, CEO and founder of DUOS. The company connects older people who need help with everyday tasks and to-do lists with virtual, personal assistances.

“I don’t think we’ll ever be in a place with this business where everybody has a space within the real estate setting,” Ulfers said. “But I do think it’ll be critical to have a home base, where we can bring people together for our business.”

Amenities included with office space that medtech companies want to lease will also likely change. Instead of roof-top decks, a medtech startup may opt for a room with high-quality video equipment that allows it to hold virtual meetings. These companies are also likely seeking spaces with numerous technology capabilities, said Frank Jaskulke, the Medical Alley Association’s vice president of intelligence, organization strategy, global business development and startups.

“I’m constantly amazed [by] the creativity that’s out there in the real estate community — both on the development and on the brokerage side — to create an environment that people want to be in,” Jaskulke said.

Medtech companies, many of which produce medical devices or technology, are also beginning to consider leasing shared lab or cleanroom spaces. Jaskulke anticipates this market expanding. Medtech startups need lab space, but don’t possess the high amounts of capital needed to build such a space, he said.

“I think that’s going to be a growth area for this region,” he said.

The region has several lab spaces that already meet this need, including University Enterprise Labs in St. Paul and Incubology, located in Oakdale. Rochester also has a few labs, he said.

Several coastal technology hubs, including San Francisco and Boston, have seen success with these shared lab spaces. Johnson & Johnson has constructed shared lab spaces in these communities and globally, resulting in new investment and acquisition opportunities for the company, Jaskulke said.

These expected changes will likely impact the business models of commercial real estate companies. Specifically, new developments will look different than normal, and long-term leases will likely become less interesting to companies, he said.

The shift to remote work will aid in tech recruiting. Before the pandemic, remote work was a deal-breaking factor for many applicants, Jaskulke said.

Recruiting talent in the technology industry is competitive, and companies need to offer remote working options. It also allows companies to recruit in other markets, Ulfers said

“Local companies that maybe haven’t had to compete with some of the national brands may now have a bigger pool of employers that they’re trying to compete,” Jaskulke said

However, a lack of a physical space could challenge new employees and their connection to company culture — a concern Jaskulke said he’s heard from numerous Medical Alley members.

“The culture-building part has to be so much more prescriptive and thoughtful than it was before, which is probably a positive thing in its own right,” he said. “But it’s forcing all of us to step back and kind of question like the default of: You have a company, you get a space and you invest in people in the space — and that’s how you build the company culture.”

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