UK life sciences sector faces development challenges as demand increases

The UK government is encouraging investors and developers to consider the life sciences sector when investing funds. It follows a huge boom for the industry in 2021, with a more stable, long-term demand now existing as the market has somewhat steadied. There remains however, an ongoing need for more spaces for firms to move into, whether it be start-up businesses looking for a space to launch, or existing firms requiring more room as they continue to grow.

Currently, there has traditionally been specific geographical areas investors may look to invest in when it comes to the UK life sciences market. These areas are focused around the established life sciences centres in London, Oxford, and Cambridge, known as the “golden triangle” within the industry. However, investors and businesses face problems such as rising rent year on year, according to a report by Savills, as well as a lack of capacity in these popular areas. There are also challenges around the supporting infrastructure in these areas, including for example availability of good quality affordable housing of all types and at all price points for those who work in the life sciences sector. It means that firms are beginning to look elsewhere and beginning to consider what other options there may be in this growing sector.

To address the space issue in the longer term, new developments are in the pipeline, including by Bruntwood SciTech, Kadans and Canary Wharf Group, outside of the ‘golden triangle’. For example, Bruntwood are branching to areas such as Manchester. However, the general lack of current available space (both existing and suitable to develop for this purpose) remains challenging and risks hampering the growth of the UK life sciences sector.

It is not just the issue of finding space to accommodate players that is the only concern either. Challenges for firms within the sector include access to start-up capital, with questions over where finances are coming from. This then has an impact on the space that these businesses can take up in the first place (both from an affordability and popularity perspective) and where these spaces may be. The space requirements of businesses in the sector are specific, which makes finding the right property difficult. As the business grows there is a need for more space, but with the lack of suitable and available space to move or expand into, it can become difficult to accommodate business needs, in turn hindering potential growth. Some experienced players in the market have already voiced the problem of having occupiers with several small spaces as a result, which can itself present both operational and business growth challenges.

Other challenges for investors and developments can include building for “imagined” tenants to meet future demand, with developers speculatively investing in real estate in advance of actual business need. This is due to many firms being start-ups (which inherently means that a proportion of those start-ups could fail or run into difficulties) as well as the quick growth of existing businesses, making forward planning for suitable real estate quite difficult and even in some circumstances risky for investors and developers.

Repurposing space which already has access to things like good transport links and existing delivery routes could prove beneficial and may be one potential solution, especially when compared to developing new plots where it may prove difficult to link to cities for supplies and supporting infrastructure. For example, an old retail or office building could provide a good opportunity for life sciences development, with more of these units becoming available across the UK as home working and online shopping removes the need for their original use. What’s more, it may be possible to rely on permitted development rights to undertake such repurposing, making it easier for investors and developers following the creation of the new ‘Class E’ commercial use class (which brought the majority of employment uses within the same use class) thereby assisting with the repurposing of commercial floor spaces.

There are important considerations when it comes to suitability of premises, however, due to lab space requirements often being bespoke. Developers cannot simply repurpose any empty site, owing to a number of factors. This includes (but is not limited to) the power requirements for a lab, which can be up to three times higher than the typical power use of an office for example. It means changes to, and installation of, alternative power sources may be required to facilitate the equipment to be used in the space. Air change rates – a measure of the number of times an area’s air volume is replaced – must also be analysed. A typical office has an air change rate of 8-10 litres per second. However, labs cannot operate with a rate lower than 6 litres per second due to the potential build-up of toxins caused by the work carried out in the lab, therefore extraction and plant facilities may need to be carefully assessed, as well as floor to ceiling heights.

Developers could also consider utilising and / or repurposing land or buildings not currently used to their full potential by universities across the UK. If suitable, these spaces could provide a number of benefits including the likelihood of existing transport routes for workers as well as access for supplies – and the expertise of those already studying or carrying out research within the life sciences sector at these spaces, creating a synergy that may not exist elsewhere.

Another potentially viable option for consideration amongst investors and developers is a flexible lab type solution akin to flexible workspaces, allowing different businesses to utilise the same space. With many other industries opting for flexible workspace options – for example, the corporate world adopting a hybrid approach with home working and hot desking at its centre – it may seem sensible to adopt this within the life sciences sector. However, although this is a promising option in theory, it may not be as suitable in practice, as many life sciences businesses require a very specific set up to carry out their work – for example bespoke lab facilities, certain equipment and expertise, together with a 24 hour concierge for time sensitive deliveries; as such it will depend on the nature of the business at hand as to who they can realistically co-occupy with. It may, however, be a viable solution for investors looking to develop property for start-ups requiring smaller spaces or those looking to house specific firms within the sector – for example, a range of cancer research firms.

Overall, the UK’s life sciences sector has grown dramatically in recent years and remains an exciting opportunity for development and investment.  Despite slowing down, the number of businesses and space required for these firms has soared since pre-pandemic times. The UK remains a way behind the life science sector in the US and if there is to be any hope of catching up, there is a need to “think outside the box” when it comes to suitable real estate to house these businesses and what else those businesses need around them to create viable life sciences premises and long term success. If investors, developers, and businesses do not start looking at alternative options and the bigger picture, the UK risks not meeting its potential as a global leader in the life sciences sector.