Interview with George Fraser-Harding of Aviva Investors

We spoke with George Fraser-Harding, head of European Funds at Aviva Investors, about life sciences real estate. Aviva Investors has been investing for more than ten years in the sector with an investment volume of approximately £1 billion (€1.14 billion). The majority of the investments is located in the United Kingdom in cities like Cambridge, Oxford and London. We also invested in Continental Europe, for example in the R&D headquarters of Danone in Utrecht Science Park in the Netherlands.

Why include life sciences assets in a real estate investment portfolio? What is the added value?

In general, we believe that there are two important characteristics to add value in equity real estate. One way to add value is to invest in the major longer-term trends that are driving the economy and the real estate markets. A good example is the logistics sector. Another way to add value is by taking on more operational risk such as in the living sectors. We do see that that real estate has become more operational over the last ten years. Sitting back and taking rent is no longer an option for growth investors. The days of limited capital reinvestment and taking negligible operational risk are over. The life sciences sector uniquely allows you to focus on both characteristics. Life sciences is an important driver in the economy and there are opportunities to create value by operational management. We have demonstrated in Greater Cambridge that running a park as a service (with high operational intensity) adds additional value in addition to getting market beta from just investing in the sector.

How important is it to understand clients, tenants (universities, life science businesses), and communities?