Rising Rents Push Manufacturer to Buy in Silicon Valley

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Alameda County had 85 medical supply and equipment companies employing not quite 3,600 workers earning a weekly average of $1,723. San Mateo County had 42 companies with fewer than 660 employees; there are fewer than 150 medical-device workers in San Francisco.

Zoll’s search for a new building extended up the Peninsula and into the East Bay, Palazzolo said.

Zoll makes two devices at its Silicon Valley operation: the Thermogard XP Temperature Management System, which regulates a patient’s body temperature, and the AutoPulse Non-Invasive Cardiac Support Pump.

The sensitivity of its products, including Federal Drug Administration oversight and the threat to life and limb in the case of failure, has led Zoll to keep manufacturing close to management. “Medical devices are a quality-intensive business. It is heavily regulated and the quality and attention to detail and how we manufacture our products are critically important,” Palazzolo said.

Its lime-green defibrillators are perhaps one of the few ways that an average person might know the Zoll brand. They are often used for public access in schools, airports and shopping centers for cases of sudden cardiac arrest. “You could grab this, and it talks and tells you what to do. It knows when to shock the heart and when there are times when a shock isn’t needed, such as a diabetic with an insulin crisis,” he said.

The lifesaving attributes of the products and the complexity of their manufacturing imbue the company culture with patience, dedication and passion. The building’s aesthetics mattered less than its functionality and cost. He declined to say how much they paid or what they were investing to improve the property.

San Jose general contractor Iron Construction, which specializes in the medical-device sector, is completing the tenant improvements. It is the second manufacturing plant that Iron has done this year for a company actually producing products to sell directly into the market rather than prototype manufacturing, a discipline that the Silicon Valley also has incubated.

“What we have seen over the last several years is a surge in tenants building out spaces for themselves,” said Dave Edgar, president and cofounder of Iron, which itself is growing. “For a long time—it was really a precursor to the Great Recession—there was a lot of market-ready work by large building owners, but no one was taking the space.”

Medical device, instrument and diagnostics makers constitute 40 percent of the state’s biomedical industry with 101,000 workers. Employment in the sector overall, which includes pharmaceutical makers and academic research, fell by about 7,000 jobs during the financial crisis and has stabilized at just more than 267,000.

While wages are solid in the medical-device sector—on average about $59,000 a year—they are well less than other disciplines within the total; biopharmaceuticals workers earn an average of $106,000, according to the 2012 PwC-BayBio-CHI study.

Pharmaceutical manufacturing represents 10 percent of San Francisco’s manufacturing jobs base, its third-largest manufacturing sector after computers and electronics and food.

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