What are Life Sciences?
Very simply put, all sciences related to organisms such as humans, animals and plants.
The companies operating in the Life Science sphere are often highly specialised companies with an extensive knowledge base working in the following areas:
- Biopharmaceuticals – companies creating or producing pharmaceutical products (from small molecules to sophisticated biotherapeutics);
- Medical Technology – businesses focused on the development of medical technology products (from single-use devices to complex medical machinery for hospitals);
- Non-medical Biotech – primarily agrichemicals and biotechnology.
Whether it is down to Covid-19 or not, the science & technology phenomena, after brewing for several years, has really exploded in 2020. Life Sciences is a vastly undeveloped real estate sector despite the UK having one of the most advanced life science research markets in the world. It could be argued the UK is second only to the United States.
The number of occupational enquiries from Life Science companies has risen and it is certainly being put under the microscope by investors and lenders who are looking to deploy capital into the sector as they can see the potential this growth area offers.
Key Attributes to Attracting Life Science Players
What are some of the key components to providing accommodation for a Life Science company?
- Formal links or close proximity to a higher educational institution or a major centre of research such as a hospital.
- Opportunity to create a cluster effect – incubator or innovation centres allowing small start-ups to expand on to the wider park.Multi-national companies want to be close to the new start-up/innovative firms to collaborate and share ideas.
- Local high-quality talent providing a deep pool of excellent potential employees.
- High specification and flexible premises, ideally in an attractive environment.
- If the Science Park/Business Park is in single ownership or JV it can provide greater control allowing decisions to be made expediently and in turn benefitting the tenants.
- An active management presence who understand the tenant’s needs & requirements and help to create an environment & setting for these businesses to thrive.
- On site amenities for employees – landscaping, lakes, running tracks, gyms, swimming pools, day nurseries, restaurants/cafes etc.
Occupier Demand Outside of Central London
During lockdown we have seen many examples of occupiers taking on new space undeterred by the thought of Covid-19 and any impacts it may have on the economy and their property decisions. Already incredibly popular locations, such as Cambridge, have benefitted from acquisitions by Bit Bio who have leased 25,000 sq ft at BioMed Realty’s scheme at Babraham Research Campus (July 2020) and Amgem who have relocated and taken 35,000 sq ft at Cambridge Science Park (March 25th 2020).
In Kingston-upon-Thames, Steris Instrument Management Services have acquired 41,000 sq ft at Aviva Investors’ Barwell Business Park to support a newly awarded sterilisation services contract for Kingston Hospital (June 2020).
Investors have seen a similar opportunity in the science and tech arena, in what is not normally a segregated market from the more traditional office or business park sector there have been two notable transactions. Harrison Street, in partnership with Trinity Investment Management, acquired a portfolio of five specialist life science centres around the UK for a reported £185 million. Brookfield, who have significant exposure to the sector in the United States, have bought a 50% stake in Harwell, Oxfordshire for circa £250 million. Harwell has recently been granted funding from the UK Government to develop a building which will manufacture a vaccine for Coronavirus once it is established.
There has been another notable transaction on a single let building, LCN Capital Partners acquisition in June 2020 of Sapphire Court, Coventry for £22 million which is fully let to AAH Pharmaceuticals for over 12 years.
There are many development opportunities in the UK at the moment but two examples which have seen recent publicity are:
- Abstract Securities, a significant developer of office and business space, has seen the potential Cambridge and the sector has to offer.Abstract has teamed up with Cambridge College Peterhouse and acquired a site in Cambridge to develop 300,000 sq ft of offices speculatively.
- L&G and Bruntwood created a platform in 2018 known as Bruntwood SciTech and have circa 1.3m sq ft under management but are looking to expand significantly in the coming years.
From a valuation perspective, we are seeing investors and key stakeholders seeking to explore this part of the market as traditional office investors and occupiers are pausing and considering the implications of lockdown and the trend to work from home. Laboratory, and research & development occupiers will continue to require accommodation to work in as the vast majority of their work cannot be carried out at home! There are certainly plenty of opportunities out there….
For any queries or questions do get in touch with CBRE valuation.