Investment into commercial real estate for the UK’s life sciences sector in the Golden Triangle, the area spanning London, Cambridge and Oxford and the UK’s leading market for life sciences and innovation, totalled over £496m in Q1 2023, according to the global property adviser Knight Frank.
This figure represents the highest first quarter investment total on record for the life sciences sector and the best quarter for investment since Q4 2021.
Notable deals over the period include the acquisition by a joint venture between GIC and British Airways’ New Airways Pension Scheme to develop a c. 443,000 sq ft of lab space at Tribeca in King’s Cross in conjunction with Reef Group. A GIC and Oaktree joint venture also purchased 17 Columbus Courtyard in Canary Wharf from Macquarie for c. £100m, demonstrating the diversity of capital seeking to deploy equity within the sector.
London represented the largest share of investment activity in the Golden Triangle, making up 79% of the total. This represents London’s growing role as a hub for Europe’s leading life sciences companies, particularly in the submarkets of King’s Cross, White City and Canary Wharf where significant new developments to deliver Grade A lab and office space are either underway or have been recently completed.
Q1 life sciences lab take-up in the Golden Triangle totalled 86,876 sq ft, while life sciences office take-up in the region totalled 62,277 sq ft over the same period. Overall, take-up in Q1 was 127% above the same period in 2022. Key deals include US-based New England Biolabs, a producer and supplier of enzymes, signing for its first overseas manufacturing and product development facility at a 30,000 sq ft unit at Milton Park in Oxfordshire. ADC Therapeutics, an oncology-focused biopharma company, also expanded its presence at the I-HUB in White City, taking an additional 12,000 sq ft. Notably, Moderna has also committed to the delivery of a c. 145,000 sq ft production facility at Harwell, subject to planning approval.
Despite this increase, take-up figures in the Golden Triangle are severely constrained by a lack of available space. Knight Frank estimates that in Cambridge there is currently demand for over 1m sq ft of lab space in the region but only c. 24,000 sq ft currently available. The current development pipeline indicates that this level of demand will not be met until at least 2025/26, with a similar supply and demand imbalance in London and Oxford.
This critical undersupply of suitable space is likely to be exacerbated by the continued growth of the sector in coming years. Q1 2023 saw the formation of 283 new life sciences companies in the UK, the most of any quarter on record. Given the Golden Triangle’s reputation as a leading market globally for innovation and life sciences R&D, many of the newly formed entities are anticipated to target the region’s office and lab markets, further constraining available supply without a swathe of new development activity.
Emma Goodford, Head of Life Sciences and Innovation at Knight Frank, commented: “The UK life sciences sector is in a period of sustained and rapid growth, attracting capital from a range of sources including sovereign wealth funds, public pension plans and private equity as well as venture capital. The Government’s science strategy and a heightened public awareness of the importance of life sciences R&D post-pandemic is driving the formation of an array of new entrants and spurring the market’s long-standing leading operators to new heights. This rapid growth has focused attention on new investment and development projects in the Golden Triangle, reflected in record Q1 investment figures.
“The sheer scale of growth of the life sciences occupier markets in Oxford and Cambridge continues to outstrip the delivery of new schemes, leading to an acute shortage of Grade A lab and office space in the UK’s most in-demand markets. While it is encouraging to see the Government prioritise the UK’s potential as a leading global hub for life sciences, it is critical that more is done to incentivise the development and repositioning of modern, fit-for-purpose life sciences lab and office space if the sector is to capitalise on, and keep pace with, record levels of demand. Equally important is the experienced capital to support the scaling of some businesses in the sector now experiencing rapid growth”
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