Vincenzo Maggio, Partner in Real Estate Investment at law firm Mills & Reeve takes a look at the current lab space shortage.
It is no secret that despite significant business space demand across Oxford and Cambridge there is an equally significant lack of supply.
But don’t take our word for it – Bidwells’ latest research shows that there was close to zero lab space available as of June this year, with Savills and JLL both reporting similar trends.
Since the inception of the first science park in the early 1970s, the real estate life sciences market flourished and saw huge growth in the years leading up to 2020 when a certain global pandemic undoubtedly catapulted it into the national spotlight.
What has Covid got to do with it?
If Covid was a storm, the life sciences sector has not only weathered it, but it would be fair to say, cured it too. And it certainly accelerated the demand and requirement for lab space. The pandemic saw all eyes on the sector to provide the route back to ‘normality’ and it did so in record time with investment into Oxford life sciences growing around 50%.
Where we would have previously seen location, fit out and logistics being top of the priority list for new lab spaces, the recent lack of space has resulted in an increasing move towards more off-piste locations as a solution to accommodate the growing number of life sciences businesses.
The real estate life sciences sector isn’t the only one affected – Covid saw high streets, retail and offices all catapulted into an acceleration of change largely resulting in empty, distressed properties.
So there is empty space available – can we make use of it?
Repurposing is a word we are hearing increasingly since the Covid pandemic. Many former retail and office units have been repurposed for uses such as health, care and wellbeing, community groups, leisure and last mile logistics. And now we are seeing the turn of the life sciences industry becoming accustomed to the increasing number of empty commercial spaces. With such high levels of demand for lab space, it was only a matter of time before life sciences businesses had to stop putting location and logistics as priority and embrace the empty city centre locations to refit into lab space. In Oxford alone, we have recently seen the creation of state-of-the-art lab space, which will be one of the first parts of the redevelopment of The Clarendon Centre in Oxford and used by life science businesses.
However, the core fundamentals remain; that life science clusters need to be proximate to academic and healthcare institutions and that the end users need to be able to actually operate labs in repurposed space. So, whilst repurposing is a potential solution to the current pressures in the sector it is not the long-term saviour!
The resilience of the real estate life sciences sector
Despite the challenges of the past few years, we have seen significant growth in the sector and as a result, increased investor interest especially within the real estate investment market. Our offering has reflected this growth with Mills & Reeve being instructed on five of the seven largest life sciences transactions in 2021, two of which involved properties in Oxford.
The Oxford-Cambridge arc is home to a hugely productive and innovative life sciences sector, but this growth will stop unless we solve this physical infrastructure issue.
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