The life science sector has been riding high on a wave of investment, propelled in large part by the spotlight the pandemic put on the NHS and R&D. Rising demand and a shortage of space have pushed up property values. Is the sector in good shape to ride out the economic challenges of high inflation and energy costs?
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ISSUE 01 | OCTOBER 2022
"Our job is to help [life science] businesses understand the supply pipeline and options."
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Matt Lee, Head of Science & Technology
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Matt Lee, Head of Science and Technology, Carter Jonas describes the life sciences market as in "a perfect storm" but not completely immune to the headwinds. He says: "Macro-economic pressures slow things down in a way that you wouldn't otherwise get; higher costs means companies may be more cautious about how they approach expansion.”
Riding a market wave and weathering an economic storm
However, life science businesses are a huge economic driver for the UK, employing over a quarter of a million people and generating a turnover of £88.9bn. And economic challenges must be viewed against a number of positive market influences.
The Government has earmarked the sector for growth which provides public sector investment and incentive opportunities. The levelling up agenda may further benefit cities outside Oxford, Cambridge London arc which have growing life science clusters.
The NHS is also undergoing a digital transformation putting the spotlight on developing med-tech coupled with a huge backlog of patients waiting for diagnosis and treatment from the pandemic.
"There is pressure on the NHS, and a key way to address this is to look at new technology to boost efficiency, reduce waiting times, assist with diagnosis and remote care," says Lee.
Advanced materials are also playing a growing role in R&D in life sciences. For example, harnessing anti-microbial properties for use on hospital equipment and surfaces to reduce infections and for increased sensitivity in diagnostic testing.
"It presents a big opportunity for innovation. And from an international perspective, because the NHS is fully inclusive, it offers a diverse data source which is attractive for collaboration."
"[specialism] creates localised opportunities, with NHS trusts looking to collaborate on research and development"
During COVID, many diagnostic and biotech companies generated a lot of profit, giving them money to invest in R&D and infrastructure. However, expansion and growth come when there is already high demand and low supply. And not just in the key Oxford-Cambridge-London life science clusters.
Developers and new entrants to the market are looking to bring forward supply, but there is a time lag until delivery. "And that's where we are at the moment," says Lee.
Newer businesses and SMEs tend to be reactive to their property needs taking space as and when needed rather than planning ahead.
"Our job is to help these businesses understand the supply pipeline and options. The danger is in potentially losing inward investment if the space isn't there, but businesses already settled in a particular city will more likely make things work in the short term," he adds.
"Oxford, Cambridge and London are a natural fit when coming to the UK, but increasingly there are really good opportunities for life science businesses in other regional cities."
Bigger companies will look at strategic acquisitions over two years which gives them time to have a building developed. However, it's important to have resilience in the supply pipeline to meet all demands as the companies grow. If there isn't space to take, it stifles growth.
While having the right space and facilities is important, life science businesses are often led by existing ecosystems and the opportunity to collaborate, whether with a particular local authority, health trust or university.
"A lot of companies globally recognise that Oxford, Cambridge and London are a natural fit when coming to the UK, but increasingly there are really good opportunities for life science businesses in other regional cities," says Lee.
Cities like Birmingham, Manchester, Liverpool, Newcastle and Edinburgh are proving attractive propositions for occupiers, investors and developers as they also have the right ecosystem to support life science businesses.
And, access to talent is increasingly playing a part in locational decisions. "I see a lot of companies looking at regional cities because they've exhausted the talent pool in their existing area," he says.
As well as ongoing investment in Oxford-Cambridge-London, there are a number of large projects in other cities, including the Birmingham Health Innovation Campus in Selly Oak, Helix in Newcastle, Citylabs in Manchester and Paddington Village in the heart of the Knowledge Quarter in Liverpool.
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Each city has its own specific areas of research for example Manchester does a lot of work in in-vitro diagnostics, Newcastle’s focus includes dementia and healthy ageing, and Leeds includes musculoskeletal and infection. These specialisms sit alongside the more cross-cutting focus areas such as oncology, cardiology and respiratory illness. This creates localised opportunities, with NHS trusts looking to collaborate on research and development in their specialisms.
"Key is recognising the local needs and demands within each of the different life science sub-sectors and creating the right space to support the innovation in that area," he says.
There is also the potential to capitalise on additional funding from the Government's levelling up agenda. "It is all criteria which could turbocharge the market in these regional cities in the coming years," says Lee.
One area of the life science sector that can easily get overlooked is space for manufacturing. These facilities often need to be part of the same ecosystem and infrastructure but can be challenging to accommodate. They take up a huge amount of development land on science parks but aren't necessarily looking to take space on more traditional industrial parks.
"There is demand out there for creating national life science manufacturing hubs," observes Lee.
The life science sector isn't alone in being in the economic growth spotlight at the moment; the energy crisis has renewed the focus on clean energy generation. This is driving demand for R&D and high-tech manufacturing facilities.
Economic storm clouds may be gathering, but for both life sciences, low carbon technology and renewable energy, the market is in promising shape to weather the conditions.
"Key is recognising the local needs and demands within each of the different life science sub-sectors and creating the right space to support the innovation in that area"
ISSUE 01 | OCTOBER 2022
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Where there is challenge, there is opportunity
New industrial partners talk people and market prospects
Corporations increasingly embrace Artificial Intelligence, setting off deep changes in the use of the office
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Where there is challenge,
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