COMMENT In the aftermath of the Covid-19 pandemic, the UK is firmly establishing itself as a global life sciences powerhouse. A combination of investment by the government, through its Life Sciences Vision, and access to top talent through world-leading universities has led to both a rapid increase in the number of life sciences businesses and a growth in the size of existing life sciences businesses.
As a consequence, there has been a surge in demand for laboratory and office space, especially in the so-called “Golden Triangle” of Oxford, Cambridge and London – all home to top universities and research institutions and therefore the talent required for thriving life sciences hubs.
But the market is struggling to accommodate this demand, arguably nowhere more so than in London, where available laboratory space is currently running at approximately a quarter of occupier requirements.
While this is expected to be partially redressed in 2024, given the number of universities and research institutions in London, and life sciences hubs already forming and accommodating businesses with growth potential, demand for space is likely to be high for the foreseeable future.
Bogged down in planning
If the UK is to realise its potential in the life sciences sector and deliver on the government’s strategy, it is vital that the property industry can deliver the space required to accommodate it. But with the demand and supply imbalance being so stark, the implication is that the system is currently faltering.
A large amount of the blame is being directed at the planning process, with figures suggesting that at the end of 2023, more than 2.5m sq ft in London was awaiting a planning decision. Of the 20m square feet or so of life sciences space thought to be somewhere in the planning process nationwide at the end of 2023, figures suggested that more than 60% was still subject to a decision. Put simply, getting planning permission to develop life sciences space is taking too long.
This is down to a combination of factors. A general lack of resource and capacity at planning authorities means there is limited bandwidth for considering applications quickly. When applications finally do get in front of committees, issues of policy can hold up or derail schemes in their entirety. For example, getting planning permission for development in central London that includes demolition is proving increasingly difficult.
A potential solution may be found in the recent decline of offices, with property investors left with underperforming vacant or soon-to-be-vacant office assets in central London that need significant capital investment to attract occupiers and/or comply with minimum energy efficiency standard requirements.
Rather than refurbishing those buildings to cater to an office occupier market diminished by hybrid working post-Covid, some investors are instead considering repurposing them as research and development space to take advantage of the demand and therefore increase their returns.
Lure them or lose them
In theory, this should help circumvent some of the planning timing and deliverability challenges associated with ground-up developments, although it is unrealistic to expect no interaction whatsoever with the planning process and therefore some impact from the procedural issues discussed above must be anticipated.
There is also the reality that the characteristics of life sciences space (high ceilings, large floor plates capable of bearing heavy loads, high-performance air-conditioning, etc) cannot be accommodated in every building, and therefore repurposing will not be appropriate in every scenario, especially when occupiers’ requirements can be so prescriptive.
What is clear is that unless something can urgently be done to deal with the paucity and cost of research and development space in London, life sciences businesses may well be forced to consider choosing other locations or, worse, other jurisdictions in which to start up and/or grow. This would be a catastrophic blow to the government’s ambitions and would lead to a departure of both talent and revenue.
James Banks is a partner at BCLP
