This article follows from Vincenzo Maggio's insight earlier this year considering whether the life sciences sector is running out of lab space, and which reflected on the growing trend of repurposing existing office space to plug the gap.
Is this thing on?
Early on in the project (ideally during the negotiation of heads of terms), you should investigate the capacity of the existing power supply at the premises. Laboratories draw significantly (between 3x -4x) more power than office space, and often, the power supply to office premises is insufficient for laboratory requirements.
The consequence of this is that somebody will have to bear the costs for any necessary upgrade – which in the worst cases is prohibitive and could lead to the discussions ending before the project even gets started.
So if you’re a tenant undertaking fit out works, it may be that costs have to be shared with the landlord. Alternatively if you’re acquiring (either as an owner-occupier or investor), you may need to factor upgrades costs into the price being paid.
Don’t assume the existing planning permissions will allow lab use
With the advent of the “E” use class, ensuring your property has the appropriate planning permissions can be less of an issue than in previous years. However, you (or your advisers) should confirm that:
- the property does benefit from E use class (or equivalent if the permission predates the introduction of the revised use classes), and
- there are no conditions attached to the planning permission that would prohibit use for commercial research and development
Watch out for boilerplate provisions
It’s extremely common for the “user” clauses in commercial leases to include prohibitions on use in ways which may actually be contravened by day-to-day laboratory processes. For example, is there a prohibition on bringing dangerous or hazardous substances onto the property? A standard prohibition on animal testing could stop you from using cell cultures.
Similarly, “internal demises” (ie a lease of part of a building) will typically prevent the tenant from carrying out external or structural alterations. However, tenants will commonly need to bring in gas supplies from, or fit air handling units to, the outside of a building. This should be considered at heads of terms stage in respect of initial fit out works, and the alteration provisions in your lease should provide enough ongoing flexibility to allow this type of alteration to be carried out in the future.
If you’re thinking of taking on a new repurposing project, do get in touch to see how our sector-specialist real estate lawyers can help.
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