Evolving opportunities in the life science sector
Date of Article
Dec 06 2021
Commercial sectors

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Daniel Francis
Head of Research
020 7518 3301 Email me About Daniel
Dan Francis is the Head of Research at Carter Jonas, responsible for delivering the firm's programme of market and topic-based research across the commercial, residential and rural sectors. Since joining the business in 2018 he has developed a research programme to provide insight into the immense change occurring across the markets in which we operate. Dan's principal focus is the commercial sector, and he provides regular insight into the drivers and performance across a broad range of markets.

The life sciences sector is increasingly moving from being ‘opportunistic’ to ‘core’ on the radar of property investors, accelerated by the pandemic and long-term demand drivers.

For global property investors, the UK is an obvious choice, being an established leader in the sector with a significant skills base, a highly developed infrastructure, and growing support from government. In contrast to the ongoing seismic shifts in the office and retail sectors, the life sciences are less prone to the impacts of the remote working revolution, as well as being relatively ‘Brexit-proof’.

Examples of recent transactions since 2020 provide evidence of the sector’s attractiveness, including the acquisition of Kadans Science Partner by AXA Investment Managers – Real Assets; Brookfield Asset Management’s purchase of Arlington; Magdalen College selling a 40% stake in The Oxford Science Park to GIC; and BioMed Realty acquiring Cambridge International Technology Park and a site at Granta Park.

The evolution of investment deals in Cambridge provides a great example of how the market has strengthened, with a recent deal at Cambridge Science Park achieving a net initial yield of 3.6%, in stark contrast traditional prime office space, where yields have remained relatively static at circa 4.75%.

The lack of supply is a significant barrier to entry for investors, and development is an obvious route where there is no standing stock. Indeed, it is noteworthy that many recent investment transactions have been primarily development-led.

Unsurprisingly, given the sector’s profile, a growing number of non-specialists are looking at ways to gain a foothold. However, the life sciences sector requires a high level of specialist knowledge, and development costs can be high.

Beyond new development, investors are looking at ways of repurposing assets, including the growing surplus of secondary office and retail space in central locations, given the momentum from the life sciences sector to locate in city centres.

This strategy will not be possible for all buildings, however. The sector often requires generous floor to ceiling heights, floor loadings, or power capabilities, and it is perhaps all too easy to see it as a solution to an underperforming asset.

The lack of space in strategic locations is a major constraint for the life sciences sector in the UK, and the delivery of appropriate accommodation is key to its continued expansion. For those with the support and innovative strategies, the opportunities remain immense.