The UK is capitalising on the post-pandemic life sciences boom. The latest budget by the UK government identified the sector as one with the potential for high growth, with the aim of consolidating the UK into a global centre.
In response, property developers are showing a greater commitment to the sector, with new life sciences hubs emerging in business districts such as King’s Cross, which is in the heart of London’s Knowledge Quarter. The newest addition in this location will be the London BioScience Innovation Centre at the Apex, part of the Tribeca development. Due to be completed late in 2023, the scheme will provide 37,127 sq ft of new laboratory space.
Further east at Canary Wharf, specialist developer Kadans is hoping to create a fully-fledged life sciences cluster. Not only has the developer pushed forward plans for an 823,000 sq ft life sciences ‘tower’ building due in 2026, but they have also taken two floors at 20 Water Street which they plan to convert from office space into flexible, fully serviced wet labs offering accommodation from 200 sq ft to 5,000+ sq ft. The latter will be an Innovation Centre filling a gap in the availability of both lab and office space for life sciences firms in central London.
Alongside this, we are seeing a continued commitment by life sciences companies to office space in central London, with both Merck, Sharpe and Dohme and GSK each taking spaces in excess of 150,000 sq ft in 2022.
NEW FUNDING BRINGS NEW OPPORTUNITIES
Public sector investment supporting the sector comes in a number of forms. Earlier this year, the Medicines and Healthcare Products Regulatory Agency (MHRA) was awarded £10 million to speed up the process by which treatments and products are brought to market. Accelerating the route to market could mean firms have to ramp up their own investment, expanding more operational functions such as administrative and marketing roles to facilitate product launches.
Additionally, the government, alongside private investors have created a £277 million Life Sciences Innovative Manufacturing Fund, providing grants to encourage businesses to scale up their commercial manufacturing of medicines diagnostics and MedTech products. The first tranche of recipients has been announced, one of which is London based Touchlight, who have been granted £14 million to establish the commercial scale manufacture of DNA to aid the production of vaccines, gene and cell therapies.
There is also support for those more newly established life sciences firms in the form of tax relief policies for R&D intensive SMEs. This will serve to create opportunities for growth among some of the smaller life sciences firms that we have seen taking office space in recent years, such as the biotechnology company Hoxton Farms, taking approximately 13,500 sq ft earlier this year at the newly built tower – Hylo on Bunhill Row in the northern area of the City.
CHALLENGES AHEAD
While the life sciences sector has generated both private and public sector support, there are several challenges with which the sector will need to contend.
- Ability to attract & retain talent
- Meeting spiralling energy costs
- Increased costs to develop lab spaces (new and conversions)
Talent attraction and retention continues to be impacted by the fallout from Brexit and the Covid-19 pandemic. As uncertainty around attracting talent from overseas continues and competition with life sciences hubs in the US and Europe ramps up, looking to the local market will increase in significance.
Over the past few years life sciences firms within the UK have been losing talent to the technology sector, which has been able to offer a more competitive package for employees. However, uncertainty within the global technology sector has subdued hiring levels, benefitting other sectors that have succumbed to the lure of tech. Yet businesses must be cognisant that the provision of amenities and benefits packages will remain a differentiator in 2023, despite adding to the rising costs of a firm.
Energy costs will be a particular challenge for life sciences firms. Although most firms in the UK are in the same boat and impacted to varying degrees with rising costs, the life sciences sector will feel these more acutely with it being the case that energy costs for lab space can be as high as £6 and £14 per sq ft according to research by CBRE. This will no doubt be a considerable drain on funding, especially for those firms with large laboratories.
Finding appropriate life science dedicated space across the UK is difficult with a shortage of supply. Despite several new developments on the horizon, pre-letting these spaces makes the volume being delivered negligible. In London, requirements from life science firms are shifting the dial somewhat. It used to be the case that much of the demand for space in London was primarily for offices, this is slowing in comparison to many firms now requiring integrated lab/office space.
However, while this can provide the best of both worlds for life sciences occupiers, this does present challenges; increased development/conversion costs to produce lab enabled spaces, rising cost of fit-out, increased rents in the capital vs regions, and limited access to the right existing stock to name the most impactful.
Whilst there is the prospect that the availability of such spaces will rise in the medium-term with the conversion of general office stock into space specifically for life science firms, such conversions are expected to be a costly endeavour with items such as air circulation units and energy systems adding to the costs. As such, the rents commanded by these lab-enabled spaces can be over a third higher than the prime office space in the surrounding market, reducing the optionality available for those smaller life sciences firms.
OUTLOOK
The development of a globally recognised life sciences centre within the capital is seeing the sector’s footprint evolve, both in types of space and location. Branching out of the traditional clusters of Cambridge and Oxford, local and national governments are making noise about London as a destination.
Whilst life science firms have traditionally concentrated in and around specific universities to take advantage of the pre-existing research capabilities and the talent network available, new locations such as Canary Wharf will be a game changer and challenge this convention. The evolution of office business districts that are looking to attract more life science firms with either standard or lab-enabled office space seems set to increase occupier diversity further, potentially improving opportunities for firms to secure the very best talent.
Further development of the life sciences space offering across London will serve to strengthen the sector’s standing globally.
