A look into the life sciences sector and its relevance within the real estate sector. How Covid-19 has increased demand for this type of space. Landlords reaction. The shape of the UK life sciences real estate sector.
The life sciences industry can be defined as the application of biology, medicine and technology that deals with living organisms. This includes biotechnology, drug discovery, pharmaceuticals, medical devices and genetics. Over the past 5 years, the sector has experienced increasing growth, whether through advancement in modern medicine, an ageing population or a growing demand for improvements to the quality of life. Some of the major developments include genomics, gene editing and cell & gene therapy. In 2020, the world has been hit by a global pandemic. Since then, advancements within the sector have only accelerated with a focus on containing the Covid-19 virus, finding a cure and researching how to avoid further pandemics. Current demand within the sector includes PPE, test kits, R&D therapy, ventilators and investments across the globe to find a vaccine. As a result, the life sciences sector has seen global attention and investment rise further.
For the industry to operate, life sciences require desk space accompanied by laboratories, temperature-controlled storage facilities, incubation chambers, speciality testing facilities, and the disposal of hazardous materials. These complex requirements often require a lot of space and capital resources. Well-established firms often have enough resources at hand to build their own infrastructure and lab spaces. This is more problematic with smaller businesses and start-ups who cannot afford this. As a result, these startups often partner up with universities and institutions which provide them with R&D access and talent. In return, the institutions receive a part of the profit if the start-up becomes successful. Landlords have picked up on this gap in the market and have researched ways in which to provide smaller scale, flexible and affordable laboratory space in central urban locations.
The global pandemic has made most businesses and their staff need to work from home, whether temporarily or permanently. This has led to landlords looking at how to reposition traditional office space into life sciences friendly usage as many tasks within the sector cannot be replicated at home. One landlord taking the lead is developer Tishman Speyer which has partnered up with Bellco Capital, an investment firm in creating a new venture in 2019, “Breakthrough Properties”. The new venture is a platform to develop and operate life sciences properties in key centres around the world to help create innovation.
Looking at the life sciences sector from a global perspective, the US is the clear market leader. Whilst the UK lags far behind the US, it is still considered a major player within the industry. London, Oxford and Cambridge are where the majority of transactions take place. One of the main reasons for such a cluster in what is known as the golden triangle of research universities, where companies and institutions are interdependent of each other and closely located which enables collaboration, sharing of knowledge, business synergies and innovation. These clusters are often defined as knowledge centres. Additionally, life sciences employees are often highly educated and well paid and they expect high-end amenities which include access to retail, transportation, entertainment and restaurants, something which all 3 cities provide.
One of the major issues within the UK sector is the lack of supply and firms outgrowing their laboratories often seeking new spaces in hubs abroad, specifically within the US, which has an abundance of supply. The UK market is nonetheless taking a pro-active approach as it aims to increase supply and have a growing influence globally. The London Bioscience Innovation Centre (LBIC), is a life science cluster which offers flexible ready to go lab space to over 50 biotech and life science companies whilst White City, known as the West London life sciences cluster, recently announced that one of the worlds’ largest pharmaceutical companies Novartis would be opening a brand new office in the area. The district has over 2 million sq ft of innovation and businesses which sites alongside the Imperial College White City Campus. And it is not only in the golden triangle where the industry is growing. In 2020, Harrison Street paid £220m for a portfolio of 5 life science spark totalling 1.5 million square feet located in Kent, Colworth, Manchester, Newcastle and Edinburgh.
Several UK universities and institutions, most notably Oxford University and Astra Zenica are working hard to find a vaccine for Covid-19. If the UK manages to be one of the first nations to develop a vaccine, the nation will be sure to permanently establish itself as a global leader within the sector.
Tags: Life Sciences, Real Estate, United Kingdom, Investment, Covid-19