Savills plc
Savills plc
10/27/2021 | Press release | Distributed by Public on 10/27/2021 02:22
Where is occupational demand in London’s life science market coming from?
A lot has been said recently about the UK's lack of available laboratory space, particularly in key hotspots such as London. While landlords are taking tentative steps into the life sciences sector, few are willing to make significant financial commitments on speculative buildings without knowing exactly where demand is coming from.
Unlike more established sectors, where you have the benefit of historic take-up and upcoming lease events, there remains a lack of intelligence when it comes to life sciences.
What, then, are the indicators of increasing demand that will help to encourage future development?
In the first instance, trends around increasing venture capital (VC) investment are very reassuring. In the first half of 2021 this totalled £853 million, a jump of 228 per cent when compared with the £260 million recorded for the first half of 2020, which was no doubt accelerated by the pandemic. Yet, when looking at more 'normal' times, the first half of 2021 was still 95 per cent higher than the same period in 2019, at £438 million.
It has already been proven that there is a direct link between a company raising capital and its subsequent real estate needs. For example, Autolus Therapeutics more than doubled the size of its space in White City from 15,000 sq ft to 32,000 sq ft at the point of raising £80 million in a Series C funding round in 2017.
This has helped to make life sciences one of the hottest asset classes, with investors predicting a rise in occupational demand as a result of growing VC volumes.
However, while it's important to appreciate that London is at the heart of some of the most exciting emerging fields of scientific discovery, actual leasing transactions have been limited when compared with other sectors. For this reason other metrics must be considered when looking at the pipeline of occupational demand.
University spinouts are another indicator of a potential uptick in requirements. For instance, Imperial College and UCL have helped to establish 76 successful life science and med-tech businesses in the last decade. Yet this is a relatively small number when compared with Oxford University which spins out around 20 companies per year, and even smaller when looking at MIT in the US. Despite this, the commercialisation of Intellectual Property is improving and will no doubt pay dividends as it continues to evolve.
There are also currently 439 London based companies that are seeking investment, 130 of whom are at a more advanced stage of funding. Although there tends to be a high attrition rate among start-ups in this sector, once they get beyond early stage seed funding, the failure rate drops significantly.
Consequently, the three main incubator buildings in London, the London BioScience Innovation Centre (LBIC) in King's Cross, Imperial's I-HUB and Scale Space, both in White City, are seeing increasing demand from early stage companies wanting to take more office and lab space.
Big pharma is also taking more space in London to be closer to these emerging bio-tech firms. MSD, Novartis and AstraZeneca have all recently completed deals and it's likely that more may follow. This trend is something that has already been seen in more mature locations across the globe.
Ultimately, while we may lack the traditional metrics to track life science demand, there's no doubt that it is there and growing.