Vail Williams partner Guy Parkes sees the fast-growing life sciences sector as a huge opportunity, despite the UK’s relatively small presence in the global market.
How do we to attract more life sciences businesses?
The creation of clusters of life science businesses is an important factor in attracting research and development, lab and science businesses.
But having a critical mass of different operators in the same industry, and the labour supply to go with it, are vital.
That is why places like Oxford and Cambridge are booming both from an inward investment perspective, as well as the invaluable life sciences spin outs from their prestigious Universities.
Whilst in the Oxford area the likes of ARC Oxford, Oxford Science Park, Harwell Science & Innovation Park and Milton Park remain the main staple for life sciences companies, there are other life sciences centres like White City Place in West London, for example, which is also gathering momentum.
Here, there is the perfect eco-system to support businesses, made up of the ideal combination of health provider (in the form of a hospital), universities for research and development and life sciences and biotech occupiers.
More VC investment in life sciences needed
In 2021, £5 billion venture capital was delivered in the life sciences sector to support innovations in biotech to improve health outcomes, whilst creating new employment and skills, and driving the development of more world-leading biotech and life science businesses.
This has dropped off in recent years due to higher interest rates but started to make a comeback in H2 of 2023.
Together with indications from the governor of the Bank of England that interest rates will drop as the year goes on, we could see venture capital growth in this sector once more.
Whilst mid-size life sciences firms have been finding it hard to attract funding and squeezed in the middle, spin outs and larger corporates have found themselves much better supported in the VC market.
As a result, small lab studios at one end of the ecosystem and larger corporate buildings at the other are driving the majority of demand.
New destinations, such as Breakthrough Properties’ purpose built 214,000 sq ft Trinity Building will no doubt benefit from the growing corporate activity.
This is translating into increased leasing demand which sits at around 1.7 million sq ft in the life sciences sector at the moment in the UK. However, there is only around 400,000 sq ft of appropriate lab and biotech space readily available.
As we discussed in our recent article on the Oxford market, more stock is due to complete in Oxford to help stem supply. Harwell Campus will deliver supply in H2 this year, with 40,000 sq ft at Zeta Building and 140,000 sq ft at Tech Foundry.
But what do life sciences occupiers want from their commercial premises?
What do lab and biotech occupiers want?
One important factor for occupiers is the ability to scale up and grow, particularly for the spin outs, so flexibility and larger complexes which allow companies to grow in situ, will compete well in the market.
Because of the lack of supply in the market, some developers are converting offices to labs. However, this may not suit all operators, particularly those with different planning grid and specification requirements.
It is generally better to build new lab and biotech space and be conscious of the environmental impact of the buildings, and their energy efficiency credentials in doing so.
We are seeing less concrete in such builds for example, but this brings with it other challenges in relation to vibration and impact on the businesses using the space.
The use of cross-laminated timber (CLT) construction and the off-setting of embedded carbon in new builds, together with a reduction in operational carbon generation, are all hot topics.
It is important, therefore, to get an understanding from the occupier about what they want from the space and fitout, including their expectations around energy efficiency and sustainability.
Often, landlords are over specifying, but through collaboration with occupiers, there is the potential to bring down costs which can then be passed onto the occupier in more competitive rents.
That said, a more generic fit out will suit the majority of the sector. Some fit out companies are even employing in-house scientists to discuss specific requirements with occupiers to ensure that they don’t under or over specify.
Will the life sciences sector continue to grow?
In short, absolutely. A rise in digital health and development in preventative and personalised treatments, together with an ageing population, will drive the expansion of the life sciences sector.
With people living longer comes more need for medicine and this is going to reshape demand for certain products and services.
This, in turn, will drive pressure for lab and biotech space, resulting in new opportunities to partner with hospitals and bring private labs and innovation hubs onsite where they are most usefully located.
This sort of collaboration enables world-leading hospitals, industry partners and research bodies to work together to develop ground-breaking therapies.
A fine example of this is the Cambridge Biomedical Campus, home to world leading hospitals, research and industry, which has been named as one of the Government’s six new Life Sciences Opportunity Zones.
The campus enables access to world-leading academics, clinicians at Cambridge University Hospitals and Royal Papworth Hospital and the ability to transition from research to product, drawing on the best talent around you, all from one site.
How can universities turn financial challenges into life sciences opportunity?
A campus approach to the delivery of lab space to support life sciences is a proven concept.
With recent news of a host of universities opening up voluntary redundancy to curb rising debt, could there be an opportunity for universities to deliver more purpose-built laboratory and office space – both to generate income producing assets, as well as delivering much-needed supply? Only time will tell.
What we do know for sure is that the life sciences sector in the UK remains incredibly buoyant, with a lack of supply continually driving rents up. Something for the astute investor or landowner to bear in mind.
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