On 24 May, Life Sciences Real Estate held its inaugural UK event, a breakfast seminar in the offices of global law firm Hogan Lovells. The event was organised in association with Didobi.
Oxford, Cambridge, and London’s dominance as the life sciences ‘Golden Triangle’ is well established. But in a post-Brexit UK, where the multi-billion-pound sector is becoming more important to the economy, can the triangle’s stronghold be broken, and where are the UK’s hotspots?
The announcement in May of a £650 million (€754 million) government war-chest to fire up the UK’s life sciences sector hammered home its importance to the UK economy.
In 2021, economically it was worth over £94 billion (€109 billion), a 9 per cent increase on the year before, while employing just under 300,000 people. And the new finance announcement will be used, among other things, to support economic growth with commitments and funding for manufacturing, skill and infrastructure for the industry that is one of Britain’s most successful sectors.
“The patents we file, the companies we generate, whether they remain private or eventually IPO, means our life sciences is just going from strength to strength,” says Mark Fisher, Associate Director BioPharm, UCL Business.
Investment and real estate development has mainly happened in the traditional life sciences ‘Golden Triangle’ of Oxford, Cambridge, and London. The pull of the universities’ reputations, sheer number of spinouts, and critical mass of research and collaboration have long made the area a magnet.
Oxbridge, Imperial College and UCL have more spinouts
Research by Beauhurst reported that Cambridge, Oxford, Imperial College and UCL generated 524 spinout businesses between 2011 and 2021, 172 in the life sciences sector. This is 50 per cent more than the combined total of the next 10 universities on the list.
Meanwhile, Cushman & Wakefield figures show Golden Triangle investment volumes reached £339.4 million (€393.7 million) in Q1 2023, while Q1 venture capital investment in companies totaled almost £464m (€543 million).
“The talent pool and established critical mass in these cities contributed to the attractiveness for both growing and mature businesses in the life sciences and tech sectors, despite the high rents,” says Mark Charlton, Research Associate, Didobi and Life Sciences Real Estate.
He adds: “Given the reported mismatch between supply and demand, it’s no wonder the Golden Triangle remains a key focus for domestic and international investors and developers.”
Increasingly, however, other areas of the UK are building reputable life sciences clusters. But where are these hotspots, and further afield, how does the UK sit against Europe, and the US?
How does the UK compare with Europe and the US?
The UK alone accounts for 46 per cent of transactions across the whole of Europe. Germany and the Netherlands dominate the continental European scene, accounting for 80 per cent of transactions there, according to data from Life Sciences Real Estate.
“Relative to European life sciences, the UK has always punched well above its weight,” says Fisher.
“We’re all struggling currently with the post-Covid economy, the dreaded post Brexit feeling, and our relationships with Europe. But with the special support of the government, and the initiatives it is creating around replacing the European funding initiatives, which we are [hopefully] on the cusp of securing, we will continue to keep our position of being number one in Europe.”
“The UK has a bigger, more thriving early-stage ecosystem,” says Artem Korolev, Founder & CEO, Mission Street. He points out that this ecosystem is linked to venture capital, infrastructure, and to acceleration. “The culture of risk appetite we have in the UK, [although] behind the US, is ahead of a lot of the European countries,” Korolev adds.
Globally, the US is the world’s most mature market, with San Francisco leading, then Boston and San Diego: the pull of the UK’s Golden Triangle see it dubbed Europe’s San Francisco.
“This poses the question,” says Stephen Ryan, Founder of Life Sciences Real Estate and Research Associate at Didobi, “of where Europe’s Boston and San Diego might be.” He adds, “This is a real live conversation in Europe.” Ryan advises, “Keep your eyes on Munich and Berlin/Brandenburg, do not rule out Paris, and also think about Copenhagen and the wider Medicon Valley. But also ask, is it possible that the Boston of Europe is in the UK, outside the Golden Triangle?”
Four big regional cities in the UK are front runners
Charlton believes so and outlines his front runners from the big regional cities Birmingham, Edinburgh, Glasgow, and Manchester. “To my mind, Birmingham, with its recently launched B-IQ Birmingham Innovation Quarter, and the 10 acre, £210m (4 ha, €244 million) Health Innovation Campus, and perhaps longer term, Glasgow through its Glasgow City Innovation District (GCID), and Glasgow Riverside Innovation District (GRID), if they fulfil their potential, offer excellent opportunities to grow scale and critical mass.”
Edinburgh’s BioQuarter, and its 10-year, £1bn (€1.16 billion) transformation plan to create the city’s health innovation district, and Manchester’s Oxford Road Corridor, home to one of the largest clinical campuses in Europe, are also up for consideration.
“What’s really exciting is Manchester and its Oxford Road Corridor,” says Tina Zhao, Investment Manager, Legal & General, “is that it is home to the UK’s largest NHS trust [Manchester University NHS Foundation Trust], UK biobank, and over 32,000 STEM graduates, so it really is having that ecosystem built up around it.”
L&G announced its partnership with Bruntwood SciTech and the University of Manchester in June 2021 to deliver a new £1.5bn (€1.74 billion) innovation district in the city.
Second tier cities have their own specific attributes
In second tier cities, Charlton offers up a list of Bristol, Newcastle, Norwich, Dundee, Liverpool, Leeds and Sheffield, with each having their own specific attributes.
“The tech and R&D ecosystem in Bristol seems to be on the cusp of a breakthrough for the city in life sciences,” says Charlton. He highlights Bristol University’s 900,000 sq ft (84,000 sq m) innovation campus, while Korolev’s Mission Street, with BentalGreenOak, plans to deliver one of the largest R&D and innovation hubs in the city, after buying 1 Temple Way last July. Newcastle boasts The Helix, another significant L&G investment: a 24-acre (9.7 ha) innovation district. In May the city council announced it is looking for an investor to accelerate the growth of the region’s £1.7 billion (€1.97billion) life sciences ecosystem.
Norwich has four internationally renowned research institutes and the Norwich Research Park. It is one of Europe’s largest, single site concentrations of research into food genomics and health in Europe, which has planning for 1.6 million sq ft (150,000 sq m) of further expansion.
With three research parks, each strategically positioned near the university, Charlton says Dundee’s challenge is to “maintain momentum in the face of growing competition,” while he describes Liverpool, as “interesting, and often overlooked in favour of Manchester” when it shouldn’t be.
Charlton highlights Liverpool’s Knowledge Quarter, a 450-acre (182 ha) urban innovation district occupying about 50 per cent of Liverpool city centre that has over £1 billion (€1.16 billion) of new developments already underway.
Leeds and Sheffield are “great cities, with great universities,” says Charlton, which have so far have been limited in sciences life and tech development. “Perhaps,” he says, “it is a case of build it, and they will come.”
So, when the hotspots are identified, what creates a good life sciences proposition?
“As a specialist real estate investor, it’s simply the right ecosystem,” says Korolev, who believes it is wrong, in the traditional real estate way, to just zoom in and start thinking about buildings.
“The starting point is: does it have the right ingredients? What is the anchor, why is a cluster going to emerge in a certain location, which is going to come from academic research, medical research, and large corporates based here.”
“Other key structural factors,” he says, “are the ability to get investment capital into the locations in terms of funding businesses, the graduate recruitment pool, and bringing in senior level people to relocate or to stay in these locations.”
“Those ingredients need to be there because once you’re outside of Oxford and Cambridge you don’t have the traditional agency approach of asking what the requirements of people are who want to find space, and what is the space that’s being developed.”
Life sciences is a contact sport
“Generally, what creates the best life sciences proposition depends on the occupier,” says Graham Cutts, Partner, Hogan Lovells. Fundamentally, he says: “You can’t get away from the fact that life sciences is a contact sport and people want to collaborate, and that is at the heart, at the essence of what they do.”
Roz Bird, CEO, Anglia Innovation Partnership, agrees: “It isn’t just about the science. It’s about entrepreneurialism, capital, but it is also about people and human interaction in that sense of community, because that helps companies to attract and retain the best people”.
“It helps them to promote what they do, and to look for opportunities to collaborate. You can’t make that up and they exist already: we know where they are.”
Bird says it’s building on this, and producing the right real estate proposition, and ‘compelling property’ at the right time. She adds: “There’s a lot of work to do to make sure you’ve got that ecosystem, that cluster going.”
Forcing open the gilded gates of the Golden Triangle
In the long run, however, Zhao says, the Golden Triangle, “isn’t going... anywhere anytime soon, but certainly the regions are catching up.”
“As an investor, there are some exciting opportunities in the regions where there’s talent and skills but there’s just a lack of high-quality real estate.”
With the UK government’s very public willingness to back the life sciences sector, and investor interest only growing, the need for space alone will force open the gilded gates of the Golden Triangle. And there are many cities and regions waiting to welcome those who want to come.
