COMMENT Demand for life sciences output is reaching new heights. But the industry’s dynamic pace means it needs new facilities and in many cases their precise specifications are unclear because the technologies and treatments they will accommodate are still in development. Where and how will growth be accommodated?
Recent estimates show the UK has a deficit of more than 1m sq ft for life sciences facilities in Cambridge alone. In addition to the race for space, the right sort of facilities must be built.
Life sciences research requires the creation of world-class facilities in a rapidly evolving market with singular asset types.
To ensure the life sciences sector fulfils its potential, a unique approach to planning and development is needed.
Rules of repurposing
The UK has a surplus of commercial real estate, both office space and retail, creating an opportunity for investors to repurpose spaces for life sciences. But life sciences is not a sector for the risk-averse. Investors must be mindful of its fast-changing nature, driven by rapidly evolving research and clients’ needs.
Furthermore, only some buildings lend themselves to being adapted to fit life sciences facilities. When compared with buildings for more generic usage, life sciences buildings have a set of specialist considerations and requirements.
When assessing the feasibility of adapting an existing property, as opposed to building a new fit-for-purpose asset, it is best to note that ultimately, a lab-enabling building does not equate to lab-ready one.
An example would be where an occupier requires a wet-lab environment; the converted building must meet the necessary structural requirements, such as large robust floor plates to cater for the array of equipment and plant that may be needed.
Therefore, investors and developers must get to grips with what type of asset will pose the least risk in terms of current and possible future adaptation and provide a long-term viable investment from the market demand perspective.
New clusters and start-up tenants
Location is another essential factor that needs more consideration. Traditionally, Oxford, Cambridge and London have cornered the market.
However, proposed investment zones could spark clusters elsewhere. Cities such as Manchester, Newcastle, Edinburgh and Glasgow have made strides in this.
Others such as Leeds and Birmingham are seeking to compete with the traditional clusters, offering a highly skilled workforce within easy reach of educational and scientific facilities while achieving competitive construction costs per sq ft.
There is also the question of what type of occupier will take on a new or converted space. Existing clusters offer huge potential for start-up businesses, particularly those that may have outgrown incubator groups based in university environments.
Start-ups do not require a huge amount of space, with many happy to share facilities to help reduce overheads and take advantage of the collaborative potential.
But investors should be mindful of the potential pitfalls. There is a higher risk of a start-up not surviving – for example if the technology it is developing proves unviable.
Meanwhile, others may rapidly become very successful and require larger premises, exiting earlier than anticipated.
Pragmatic approach
The issue of financial viability, both short and long-term, is also crucial – and particularly challenging to weigh up in such a dynamic sector. Are you developing space to operate in yourselves, or will it be leased to a single or multiple tenants?
If the latter, what are the needs of a potential occupier likely to look like not just now but in years to come? Indeed, what will the life sciences market look like in five to 10 years?
A pragmatic approach is to be neither too specific nor too generic. At the early design and feasibility stages, investors should have identified the target audience and their particular needs.
Understanding this will have an impact on the specification requirements, such as the ratio of the laboratory to office space.
Similarly, if building speculatively, or when considering a bespoke project, it is beneficial to keep an open mind until design clarity is achieved – only then can detailed planning begin.
Wherever the location, it is essential to have a comprehensive understanding of the market and assets in demand, identify a target audience and undergo extensive design planning to help further ensure long-term viability of financial investment in this real estate market.
Natalia Gospodinova is associate director of Linesight
