It’s time to put science on a pedestal

The US has a reputation as one of the most dominant and advanced life sciences markets in the world. It is home to the largest biotech and medtech clients in the world, is a global leader in innovation and has seen investment in and returns from the sector boom over the past decade. The US market has a turnover in excess of £600bn, employs more than 2m people and receives record volumes of funding from both the public and private sectors. The UK, in comparison, is a minnow, turning over less than £100bn, employing just 270,000 people and receiving just a slither of the funding the US market receives.  However, while smaller, the UK sector is growing at a similar rate to that of the US. Rental growth, according to figures from Cushman & Wakefield, is just as strong. Its latest update on the market showed rents growing by 63% in the UK since 2017, compared with 67% in the US. Figures from CBRE also showed that venture capital investment in the sector has more than doubled over the past five years and that employment in the life sciences sector is growing at more than double the rate of total employment. The UK has a perfect opportunity to be a leader in life sciences. But to capture growing demand and establish the country as the next big “science superpower” the UK would do well to look to the US and how it has utilised the power of collaboration to build a booming sector.  Components of growth Frank RoccoGrande, founding partner and head of capital markets at Deutsche Finance International, says that a successful lab office investment location requires four key components: a strong system of government funding, the ability to raise private or venture capital funding, access to a talent pool and a cluster of scientific collaborators in related sectors. “The UK’s Golden Triangle ticks all the right boxes,” he says, “which is why it has seen the majority of activity in the country so far and has played an important role in the evolution and development of biotechnology companies in its key cities.” This collaboration of government support, funding and co-location of talent is something that helped push the US market forward. The UK needs to follow suit if it really is to take advantage. “The US life sciences industry is highly collaborative, with companies and research institutions working together to drive innovation and bring new products to market,” says Pierre Leocadio, head of investments for Europe at Oxford Properties. “In the UK, the approach to collaboration is still relatively fragmented, although it is improving.” Forward-thinking, commercially minded universities have been a key driver of the US life sciences market, often committing to major development projects early on. “We have noticed that US universities seem to be very comfortable with involving companies in projects very early on by way of taking prelets on space in order to get schemes moving and demonstrate the commitment to their place,” says Wes Erlam, director of urban regeneration at Legal & General. The same is not so true of the UK universities, yet, he says. Smart collaboration Knight Frank’s head of life sciences, Emma Goodford, agrees. “The integration of academia with the sector has been exemplary in the US,” she says. “The way the top US universities have integrated into the market and driven growth is something that presents an amazing opportunity to UK academia. “A lot of the UK universities are beginning to realise that they are sitting on portfolios that offer incredible scope for development, but then they don’t have either the money or the expertise, or both, to deliver that. So possibly engaging capital and expertise outside academia could drive growth here.”  Historically, both the US and the UK have had incubators and accelerators for life sciences organised and implemented by universities, health institutions and medical centres. However, the US has also seen the private sector stepping in to deliver commercial investor-led R&D facilities to capture the excess of young companies in the sector and help them along their growth journey.  Jenny Gardner, development and construction director at ARC, says the UK is playing catch-up when it comes to private funding of incubators. However, the level of demand for this kind of start-up space should be driving greater and greater investment. According to figures from JLL and We Are Pioneer, the volume of start-ups in the UK life sciences sector has more than doubled from fewer than 300 between 2006 and 2010 to close to 700 between 2016 and 2020. Universities are the major source of start-ups in the sector, accounting for around a third the total volume.  Incubating investment In the US, California is home to seven of the top 12 US life sciences incubators and has seen high volumes of investment flood in from VC firms and government as a result. In 2021, according to CBRE figures, this totalled some $17.5bn (£14.6bn). Investment is starting to trickle through in the UK, albeit led by overseas players. Brookfield spin-off ARC has recently launched its Motherlabs concept in west London, offering flexible, short lease structures to members, with spaces that can be adapted for different types of tech and science start-up, while Breakthrough Properties, a joint venture between Tishman Speyer and Bellco Capital, plans to expand its StudioLabs offering, which includes short lease terms, no capital requirements and monthly fixed costs, in the UK. Breakthrough launched the concept in San Diego in March last year, and it will open its first UK offering in Oxford in 2025. Home-grown developer Bruntwood SciTech, a jv between L&G and Bruntwood, is also investing in innovation, bringing forward a series of Citylabs hubs to help diagnostics, medtech and genomics companies to grow and scale.  The best lesson for the UK to learn from the US when it comes to life sciences, however, says ARC’s Jenny Gardner, is to truly recognise how central the sector is to growth.  That means UK universities having faith in private sector ambitions. It means private sector investors backing start-ups, providing affordable, flexible space so those fledgling companies can grow into the billion-pound businesses of tomorrow, and it means the UK government following in the footsteps of the US and properly backing this opportunity-filled sector. The US government has increased its investment in the sector by 30% since 2017, reaching £38bn in 2022. This long-term, continued investment has been a huge contributor to the dominance of the US as a scientific superpower. If the UK government really is committed to making this country the next great superpower, it must also deliver a consistent funding approach.  “A building or campus can do so much more than meet the physical and technical requirements of a life sciences company,” says Gardner. “Many successful US life sciences investment firms hold this mindset at the core of their business and really integrate themselves into the science communities on a cellular level, providing best-in-class amenities, hosting curated events and creating opportunities for collaboration that are specially tailored to the science community. “They put science on the pedestal, where it belongs.” To send feedback, e-mail evelina.grecenko@eg.co.uk or tweet @Gre_Eve or @EGPropertyNews Photo © National Cancer Institute/Unsplash