The symbiosis between education and the life sciences sector has been ever present, where universities typically make up a large part of the real estate servicing life sciences companies. This article explores the ever-growing presence of life sciences companies in the real estate market and serves to provide an insight into the interdependence between these dynamic sectors.
A pandemic is upon us and a financial crisis sweeps all nations. Where historically financial crises have led to the sharp downfall of businesses and the swift winding up of companies, this time things are a little different as people’s lives are at stake, not just their livelihood. The U.K. government has provided support to the economy in various ways; the introduction of the furlough scheme, the business interruption loan scheme, the future fund and business rates relief, to name a few. These life-rafts are sustaining the economy and are giving society the time to reflect on the importance of one’s health and giving investment funds time to re-evaluate the markets and future trends.
Several sectors in the real estate market have struggled to endure the past year, with hospitality and retail appearing to suffer the most. Where much of the value in commercial real estate has historically been focused on the hospitality and retail sectors, the future of real estate may be safeguarded by an increased demand in the life sciences sector. With multiple lockdowns and health concerns that will stay with people far longer than the pandemic itself, spaces that were once reserved for hotels, malls and leisure centres will likely be used as laboratory space for research, development and clinical trials.
Top universities in the U.K. have for some time now followed suit with the likes of Massachusetts Institute of Technology and Harvard University, providing a space for professors to carry out their research projects with the best technology available and producing graduates that go on to create successful life science companies. In recent years, the number of investor-backed spinout companies created through academic research generated within universities has increased, with over £2.5 billion in external investment being raised by Oxford University Innovation spinouts alone since 2010, by way of example. This year, researchers at Swansea University are currently developing the world’s first smart vaccine device using microneedles to create a ‘smart-patch’ that is intended to deliver the COVID-19 vaccine and measure its efficacy through monitoring the body’s associated response. This research clearly has application beyond the pandemic to other infectious diseases and paves the way for future investment and innovation.
Buildings that house life sciences companies need far more mechanical and electrical equipment than regular premises require, so adaptability is key, and provisions need to be built into any such lease arrangements to allow for maximum flexibility as these life sciences companies progress. Going one step further, as commercial real estate shifts towards the life sciences sector, serviced apartments and office spaces could well be replaced with serviced laboratory space.
The very nature of a life sciences company means potentially the use of hazardous substances and almost certainly the need to keep the space sterile. Society has been exposed to a new world filled with sanitising stations, compulsory face coverings and social distancing, but these factors have long been present in the life sciences sector. Bespoke arrangements will need to be considered and put in place in certain circumstances. For example, landlords requiring access to buildings leased to life sciences companies will likely need to reflect in a lease agreement alternative access arrangement to comply with any safety measures required at such premises.
Paul Bashir, CEO of Harrison Street Europe and one of the presenters on the Bisnow webinar ‘Life Sciences: The Birth Of A New Real Estate Titan’ held in August 2020, explained that in the U.K., there is still a low supply of fit-for-purpose premises for life science companies. This creates a void in the market and consequently an area in need of growth attracting new investment.
In February 2020 at the very start of the pandemic, leading global investment firm KKR (together with its co-investors) announced its (rather timely) commitment to invest $200 million in Gamma Biosciences, an innovator in life sciences focused on bioprocessing tools and technologies for the development and production of advanced therapies, including vaccines, biologics and cell and gene therapies. Just last month, Gamma Biosciences announced a licensing agreement between Astrea Bioseparations, a leader in affinity chromatography and bioseparations, and Avacta Affirmer, a developer of innovative cancer therapies and diagnostics, giving Astrea access to the Affimer technology for applications in bioprocessing. This scientific advancement is just one example of how the industry is developing and cross-pollinating with backing from global investment giants.
Our view is that the ongoing effects of the coronavirus pandemic will mean increased funding for life sciences businesses and a corresponding increase in demand for high value specialist real estate. This is a trend that the real estate sector will need to keep up with and likewise financing structures, investment and lease terms and documentation will need to adapt to accordingly.
This article was first published on Global University Venturing