Why the life science real estate sector is primed to expand

Unlike traditional real estate areas such as retail and offices, the buoyant life science sector is well set to withstand the economic ravages of the pandemic, according to a major new report from Perkins & Will

The potential scale of the real estate market around life sciences is huge, but while it is relatively mature in North America, understanding and awareness is at a very early stage in the UK and Europe.

This is one of the key conclusions drawn from a new report co-authored by architects Perkins & Will, Savills and Blackstock Consulting.

Entitled Life Sciences Innovation: Building the Fourth Industrial Revolution, the report brings together international experts from across the life sciences industry to join the dots between investors, academics and the real estate sector. The report investigates the trends shaping the industry and informs the market about what demand for labs looks like.

Insights from global leaders

The report shares insights from more than 60 world leaders, including BioMed Realty, Harrison Street, Syncona and the Universities of Oxford and Cambridge. Seen as a rapidly growing and truly global industry, life sciences is also a sector deemed to have a degree of resilience to recession. In the UK alone, investment into and by life sciences companies, including mergers and acquisitions, venture capital, and private equity, amounted to £20 billion in 2020, despite the Covid-19 pandemic.

Buoyant capital raising for life sciences firms is creating a huge opportunity for real estate investors and developers to create workspaces for them, observes the report – from labs and research centres to education facilities, manufacturing plants, and offices. And while traditional commercial real estate sectors, such as offices and retail, have been a casualty of the economic consequences of the pandemic, the life sciences industry stands apart, the report argues.

‘Much of the work conducted by life sciences companies is impossible to conduct remotely…’

It puts this down, in part, to the fact that much of the work conducted by life sciences companies, pharmaceutical, biotech, and other medical research fields, is simply impossible to conduct remotely. In addition, these businesses are expanding, driven by increasing government spending and ebullient public markets.

Creating innovation districts

The Life Sciences Innovation report argues that greater government support is needed to develop innovation districts across the UK to provide start-ups and intermediate-sized companies with appropriate space and access to investment and business development opportunities. A lack of innovation districts outside of the Golden Triangle of Oxford, Cambridge and London is identified. There is a real disparity between these cities and more up-and-coming, developing locations, says the report.

Scientists conducting research outside the Golden Triangle need improved access to networking opportunities, venture capitalists, and a location that has a presence on the global stage. The UK is also lacking in its supply of incubator and intermediate space, considered an essential element of any innovation district.

The report outlines three key actions for the UK Government to support the creation of innovation districts. These are:

  • Provide grants, rather than loans, to life sciences start-ups and spin-outs to help them occupy appropriate space. These grants can come in the form of subsidised rent, which will allow any profit made in the early stages to be reinvested into R&D or equipment.
  • Develop more intermediate and growth space, allowing incubator space to be freed up for other earlier-stage companies. While this will reduce the current bottleneck, these spaces need to be developed strategically.
  • Create a Central London Life Sciences Knowledge Hub, which will allow firms that are conducting research outside of London to have greater access to the London networking base, investors, venture capitalists, and a platform with a competitive global presence.

Covid-19 has highlighted the importance of having resilient supply chains and strong manufacturing facilities across the UK, underlines the report. It argues that repurposing ‘big-box’ retail units into manufacturing hubs and laboratories could present an opportunity to create regional manufacturing facilities or distribution centres to serve communities across the UK.

Tech and life sciences index

Finally, the report also notes that in Europe, the number of initial public offerings (IPOs) during the year demonstrate a continued desire for European life sciences companies to go public. But the US NASDAQ stock market remains the preferred index on which to list. The report therefore recommends the creation of a UK equivalent tech and life sciences index. This, it says, will drive economic development in the industry and allow for significant international inward investment.

Commenting on the report, Perkins & Will managing director Steven Charlton said: ‘Demand for space from life sciences businesses is rapidly outpacing supply, and with investor interest growing, demand will continue to rise. However, laboratories are complex workspaces with unique requirements and so architects have a crucial role to play in creating spaces that can house future innovators and attract and retain the highly-skilled talent that scientific progress depends on.’

Access the Life Sciences Innovation report here

For more information on the future of the life science workplace, please look at The Changing Life Science Workplace report produced by Genentech, part of the Roche Group, in partnership with WORKTECH Academy. The report can be reviewed here.

Andrew Sansom is editorial director of SALUS Global Knowledge Exchange. Salus is a content partner with WORKTECH Academy
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