As vaccine distribution nears, are supply chains ready?
Cold storage boxes and freezer farms are only part of the picture
Recent headlines about coronavirus vaccines have raised hopes that relief is coming soon. But the vaccines themselves are just one piece of a much larger puzzle - with a whole series of supply chain challenges on the horizon.
The U.K. approved a coronavirus vaccine on Wednesday. It will be rolled out next week, making the U.K. the first country to begin receiving a leading vaccine. In the U.S., two coronavirus vaccines are on track for emergency authorization from the Food and Drug Administration (FDA), and the first non-trial injections could begin before the end of December.
This is all positive news. But from the freezer boxes that store the vaccines to the eventual vaccination sites, the monumental challenges created by the scale of the effort are becoming increasingly clear.
“In 2011, nearly 490 million people around the world received the flu vaccine,” says Travis McCready, Executive Director, U.S. Life Sciences Markets, JLL. “We're looking at billions of doses of the coronavirus vaccine in the U.S. alone. How do you actually start to build supply chain infrastructure for a product that has never existed before?”
The vaccine supply chain
In the U.S., once the FDA authorizes the vaccines, they’ll go to locations determined by state governments, with the first doses allocated to healthcare and other essential workers.
But the drug makers can’t get them there without collaboration at an unprecedented scale, says Mehtab Randhawa, Director, Industrial Research, Americas, JLL. Vaccines are only manufactured in a handful of facilities, and a sprawling infrastructure of transportation and warehouses is needed to get them to their final destinations.
In the U.S. alone, vaccines need to reach 50 states and other territories, each with their own demographics and challenges. And those issues are magnified globally. Then there are the vaccines themselves. The three leading vaccines all have different temperature requirements as well as minimum orders. And they each require two shots, though they require different lengths of time between shots.
“The challenges are great - including the fact that the leading vaccines are fragile and need to be kept cold,” Randhawa says.
Progress through the supply chain differs from vaccine to vaccine. One leading vaccine requires ultra-cold freezers with temperatures at or below -94 degrees Fahrenheit (-70 degrees Celsius) to remain effective, while another requires normal cooling systems at - 4 degrees Fahrenheit (-20 degrees Celsius).
At the ultra-cold vaccine maker’s manufacturing facilities in Michigan and Belgium, workers will place vaccines in vials, which are then stored in trays. Those trays will go into GPS-tracked cooler boxes filled with dry ice that keep the vaccine colder than the arctic winter. Trucks from the two leading delivery service companies will transport them to airplanes, or directly to hospitals and other vaccination destinations.
From there, it gets complicated, in part because of the dearth of ultra cold freezers. The vials can sit in those distribution coolers for up to 15 days, if the dry ice is replenished and the cooler isn’t opened more than twice a day. Another option is to keep the trays in conventional freezers, but the vaccine would need to be administered within just five days.
Even the -4 degree Fahrenheit vaccine has its challenges - as the regional warehouses that will store it must have reliable electricity supply and backup generators, says Matt Roesch, Regional Director, Life Sciences, JLL.
“Supply of these facilities is limited,” Roesch says, “and they are not easy to develop both due to their complexity and the availability of land near airports, but investors are certainly interested beyond the scope of initial vaccine deployment.”
It’s possible that the federal government can step in to commandeer not just cargo planes but private airplanes from companies like Delta, American and United, to distribute the vaccines across the U.S. as quickly as possible, says Creighton Armstrong, Co-lead, Government Practice Group, JLL.
What states can do once the vaccines arrive is largely dependent on funding, Armstrong says.
“States with unused CARES act funds could possibly look at using that money to move the vaccine from airplanes to the distribution sites,” he says. “But this isn’t a one-and-done effort. Ultimately, states need to put plans in place to secure and create a regional distribution plan for more cold storage as this won’t be our last pandemic.”
The administration of the vaccine is also a complicated matter. While hospitals and pharmacies are a start, they aren’t enough, McCready says.
“We can't rely just on doctors and nurses,” he says. “That is like little drips of water when we actually need to open the spigot. In order to vaccinate as many people as possible, as quickly as possible, we’ll need to enlist other medical professionals, dental offices, and large facilities.”
Investors were already hot on cold storage facilities as more Americans ordered groceries online during the pandemic, requiring more refrigerated warehouses close to the customer.
U.S. cold storage inventory is at nearly 250 million square feet (about the size of JFK Airport), representing 1.8 percent of the total U.S. industrial inventory. Vacancies in cold storage assets have remained below 10% for nearly 20 years. In comparison, office vacancy rates have been at 15.3% during the same period, according to JLL research.
“Vacancies for modern cold storage facilities are lower than in any other product type,” Randhawa says. “Older facilities are outdated and often cannot be renovated to meet modern standards based on the level of automation required.”
Now add in simultaneous demand for vaccine distribution on top of the food distribution use, says Randhawa. Construction, where there is land available, can’t begin soon enough.
UPS announced in August that it was building two freezer farms – one in Louisville, Ken., and one in the Netherlands – to aid vaccine distribution across the globe.
Changes underway in life sciences
But it’s not just industrial facilities that are in high demand. Biotech space is heating up on the back burner. The burgeoning mRNA technology used in the two leading vaccines is “a big breakthrough for vaccines in general,” Roesch says. It could lead to an easier path for the development of other vaccines.
This, combined with more public awareness of the importance of vaccine development, has investors looking to place longer-term bets on the life sciences real estate involved.
For example, Saudi Arabia-based Sidra Capital recently closed the $225 million recapitalization of Arborcrest Corporate Campus, a suburban Philadelphia office campus with a lot of life sciences and biotech tenants.
“The life science industry has been growing rapidly even before the pandemic and it is a sector we identified due to its defensive nature especially when space is being used by pharmaceutical and biotech companies for research development and even manufacturing,” says Hani Baothman, Chairman, Sidra. “Life sciences / biotech tenants were critical to this deal as we would not have considered an office campus where the tenants are from the old economy.”
The impact of coronavirus vaccine development on the development of life sciences real estate is enormous too, McCready says.
“The development of these spaces is intricate and typically spans several years, meaning it cannot happen for immediate vaccine development,” he says. “But many of the leading drug makers are already planning for new space as they gear up for years of work on the coronavirus vaccine, as well as others that will play a more vital role in our society.”
Pre-COVID-19, vaccine development could hardly be considered a sexy space because it wasn't profitable. It was also largely led by philanthropic institutions, McCready says.
“The pandemic has changed all that,” he says. “Now everyone understands the importance of investing in vaccine development and routinely incentivizing biopharma companies to do so.”