Life Sciences

The ongoing demand for Life Sciences laboratory space will continue to outstrip supply, yet relief is on the horizon as more projects near completion and enter the market.

Key Takeaways

1. Investor sentiment surrounding Life Sciences Real estate is expected to remain optimistic going into 2024. This will be particularly true for established science and technology assets in Tier 1 locations (primarily the Golden Triangle of Cambridge, London, and Oxford).
2. Take up rates for 2023 were broadly similar to 2022 but are expected to increase in 2024, as an estimated 2 million sq ft of new commercial lab space becomes available. Rental rates are still expected to rise modestly in the Tier 1 locations.
3. Venture Capital (VC) funding into the sector has been subdued relative to the peak of 2021, and that is likely to continue into 2024. However, the pension reforms announced this year could unlock billions of pounds of funding for young, fast growing Life Sciences companies.
4. UK Government commitment to the sector supporting the 'Scientific Superpower' vision was strengthened with a significant package of investments outlined in the 2023 Autumn Statement. However, a looming general election could stall momentum.  

Laboratory space ramp up 

The outlook for growth in the Life Sciences industry remains positive, and it continues to be a key contributor to the UK economy. However, the sector has not been immune to economic headwinds in investment markets, particularly impacting start‑ups and their ability to access VC funding. With public funding, there was very welcome news confirming the UK’s commitment to the Horizon Europe programme to 2027, ensuring UK researchers have access to the world’s largest scientific collaboration platform, and the grants and funding within. Government commitment to the sector strengthened with a £520m package of new investments outlined in the Autumn Statement.

Real estate dynamics 

Investor sentiment for life sciences has remained positive over the last 12 months, despite the broader economic challenges facing all sectors. Transactional volumes were 74% down versus 2022, impacted by broader economic conditions, but also reflective of many shifting their focus from acquisition to delivery. We expect this to continue into 2024 with investments centred around established science and technology assets, particularly in Tier 1 locations.  

In 2023, the take-up of lab space has remained at a level similar to 2022, with an estimated total of 720,000 sq ft. However, the availability for purpose-built commercial lab space in the UK remains limited and therefore constrains market movement. Still in 2024, supply will somewhat improve as we begin to see new lab space delivered. We estimate around 2 million sq ft of lab space will be completed in 2024, mostly in the Golden Triangle of Cambridge, London, and Oxford. Some notable developments include Stage 1 of Victoria House and Apex at Tribeca in London, Granta Park in Cambridge, and Nebula at Milton Park, Oxford.

Figure 33: UK Life Science laboratory development pipeline (sq ft)

Source: CBRE Research

Figure 34: Headline rents for fitted labs (£ per sq ft)

Source: CBRE Research

Beyond the South East, Manchester continues to develop its leading life sciences position in the North, contributing 27% of this year's total UK uptake (200,000 sq ft). Upcoming projects such as Kadans’s Plus Ultra Scheme on Upper Brook Street and Bruntwood Sci Tech’s City Labs 4.0 will help support Manchester’s growth ambitions.  

Despite the provision of new lab space, we still expect lab rents to increase in Tier 1 locations in 2024. This is likely to plateau in 2025 as we reach a more balanced equilibrium, with more supply becoming available (Figure 34).  

Private and public funding 

Although subdued relative to the peak of 2021, the BIA estimates that 2023 VC financing for UK life sciences companies will exceed last year's total (Figure 35). Their latest figures for Q3 2023 reveal the most robust funding period since the sector’s peak in 2021. This correlates with an encouraging surge in fundraising among European companies. Looking ahead, the Government’s Mansion House pension reforms could unlock billions of pounds of new funding opportunities for fast growing Life Sciences companies from institutional investors and DC pension funds.

The upcoming general election may create a level of uncertainty over the future commitment to the Life Sciences industry within the broader political agendas. In turn, this may temporarily impact market and investor sentiment.

Figure 35: Total venture capital funding raised by UK Life Science companies (£M)

Source: Pitchbook (All VC Pharma & Biotech, Life Sciences, AgTech, Medical Devices, Medtech, HealthTech (include related keywords) Search HQ Only)