Insight

Investing in Life Sciences Real Estate: Clusters

30.5.23

Many of the locational factors driving value in Life Sciences assets will be familiar to more traditional real estate investors. Location is as critical as ever.

But understating the importance of clustering – the name given to a location with a high concentration of interconnected businesses and / or research organisations – is an essential part of investing into this sector.

Clusters reflect the locational priorities of Life Sciences companies. Attracting talent is high on the list.

In late 2021 YouGov, on our behalf, surveyed over 60 UK-based Research & Development global corporates - with a combined responsibility for R&D spend of over £21bn. This study, which interviewed the Head of R&D at each company, revisited our 2018 survey to uncover whether real estate priorities had changed following the Covid-19 crisis. Being able to attract talent was close to the top of their list on each occasion. Attracting and, crucially, retaining talent is made more possible in places with a range of attractive long term career opportunities.

The collaboration opportunities within a cluster ecosystem were also considered crucial.

''Attracting and retaining talent is one of life science companies’ top priorities. But it remains a significant challenge for this sector given strong global competition and cost of living pressures in Oxford and Cambridge''
- Saul Western, Head of Commercial

The reputation of a cluster is an important consideration. Being close to a research institution or centre of excellence can provide that.

Edge-of-centre locations are where we are seeing many science and technology clusters emerge. The residual value of competing uses, such as office and residential, has been very high by comparison, but you will command a premium for the property if it can also provide connections with institutions with which Life Sciences companies wish to collaborate.

The world class universities in Cambridge and Oxford are well known as the best and most coveted research institutions in the world. The clusters that have sprung up in close proximity to these centres of excellence in recent decades have helped keep and nurture talent in these locations, supporting the cluster’s own reputation for exellence.

''We’re fortunate that in Oxford and Cambridge we have two of the world’s most prestigious universities, acting as magnets for the world’s best researchers'' - Max Bryan, Head of Laboratory & Office Agency

Leading R&D companies will become magnets for particular locations, acting as anchor tenants.

R&D companies tend to provide the anchor tenants to the clusters, and act as a magnet for talent and capital. For instance, the relocation of AstraZeneca has impacted both the city and the wider region by relocating its new headquarters to Cambridge. The global pharmaceutical giant has concentrated complementary research institutions and businesses at Cambridge Biomedical Campus, supporting its long-term growth, acting as an anchor, building the cluster’s global brand and creating jobs across the region.

Clusters - graph 1.jpg

Source: Bidwells, YouGov

Some clusters are well established, others less so. Understand the stage at which your science and technology cluster is at.

In Cambridge, life sciences and deep tech are the dominant sectors across the campuses. In Oxford, life sciences, physical sciences, energy, space, deep tech, environmental and autonomous engineering exist in clusters across the city’s various campuses.

Milton Keynes is renowned for its focus on high-tech engineering, manufacturing and Fintech. Life sciences occupy a third of the total commercial floorspace across the Arc region, while the remainder is relatively evenly split between high tech manufacturing, engineering, IT and incubator sectors.

The challenge of what to build or repurpose is helped by the grouping of different sectors into clusters at a regional, urban or campus scale. But careful thought needs to be given to the different fit-out requirements by firms in these locations. What might be perfect for a human synthetic biology company, certainly won’t be for a company involved in space engineering.

Clusters - graph 2.jpg

Source: Bidwells, YouGov

Being situated close to an academic or research institution, and within a short distance to a medical facility or hospital were key ‘distance sensitive’ location drivers for YouGov respondents. 27% of life science companies want to be located either in walking distance (10%) or a short drive from a hospital or other medical facility. Academic or research institution proximity was also voted for by 27% of respondents. Additionally, the distance from potential collaborators and those in similar fields were voted as a key driver by 17% of YouGov respondents.