SPR Life Sciences Seminar
9 February 2033, Carter Jonas, One Chapel Place, London, W1
Accelerated Evolution
Although UK life science real estate has come into the limelight through the course of the Covid pandemic, both panelists at this SPR seminar agreed that this niche in the property market has been around for a long time and has developed as a result of incremental rather than revolutionary change. However, recent innovation in gene therapies – which made a vital contribution to Covid vaccines – has given a significant boost to its growth.
Matt Lee of Carter Jonas and James Latham of the Pioneer Group, speaking as panellists in the seminar, were bullish about prospects for real estate in the sector, notwithstanding the economic headwinds facing the UK. This is because the rapid growth of life science companies in recent years has not yet been accompanied by an equivalent expansion in the space available to them, while those companies with good products continue to attract investment.
So far, the overwhelming majority of life science activity has taken place within a ‘Golden Triangle’ encompassing London, Oxford and Cambridge, a fact emphasised by Rad Radev of Carter Jonas in his opening presentation. Around Oxford and Cambridge, life sciences accounted for almost half of total commercial space take up in 2021-22, a much higher share than for any other sector. He noted that the supply of space around Cambridge continues to be particularly tight, despite its having doubled between 2011 and 2023.
Lee and Latham stressed the importance of organisational clusters in the success of life science locations, with universities, healthcare trusts and private companies all playing a key role. This not only applies to the Golden Triangle, where Oxford and Cambridge represent two of the world’s top three life science universities, but also in emerging locations such as Manchester, Liverpool, Nottingham, Leeds, Newcastle, Glasgow, Edinburgh and Bristol/Bath. Lee suggested that there could also be a trend towards new locations that are more lifestyle-driven, for instance the south coast.
However, real estate investors need to be aware that life science clusters differ from place to place. For example, Lee noted that universities tend to have particular specialisms, which sometimes relate to varying disease profiles associated with regional demography. These differences can mean different property requirements, such as the wider range of space types in use around Cambridge and Oxford. He proposed that developers are getting better at understanding the needs of life science occupiers and the way they are evolving – factors that include heavy power consumption, delivery and collection capabilities, and floor loadings and vibration absorption. Latham concurred, also stressing the recent move from the traditionally standard 50:50 laboratory/office split to something more like 70:30.
The panellists emphasised that the importance of clusters doesn’t just stem from synergies between the various players in life science activity, but also the size and quality of their labour forces. This allows talent to move easily between organisations. Indeed, emerging centres often struggle to retain the talent generated by their universities, which tends to gravitate toward the established clusters. But the panellists stressed that the UK as a whole does have the advantage of relatively low labour costs compared to international competitors.
The panellists agreed that the government’s ‘levelling up’ agenda should help speed up the development of the newer locations, although it was emphasised that this was not likely to be at the detriment of existing locations. One way that it could help might be through easing the planning process, for example along the lines of Manchester’s existing enterprise zone. Planning can add considerable time to the development process, given that these tend to be complex projects where there are a lot of competing interests to satisfy.
Tim Horsey