Insights from leading figures in life sciences real estate in Europe

We recently interviewed six prominent figures in the life sciences real estate sector to paint a vivid picture of a dynamic, evolving market. In this article, we gather together their collective wisdom to make it easier for you to understand the direction this industry is facing in 2024.

Thanks to our six interviewees: Martina La Vista of Lendlease, Rob Beacroft of Lateral, Roger Madelin of British Land, Toğrul Gönden of DRIVEN Investment, Artem Korolev of Mission Street, and George Fraser-Harding of Aviva Investors.

Resilience is a recurring theme

A recurring theme is the sector’s emergence as a resilient investment opportunity, fuelled by demographic shifts and a growing focus on health and technology.

Six key aspects that contribute to this theme are:

Growth and resilience: acknowledgment of the sector’s continuing growth, bolstered by the ongoing need for scientific research, as highlighted by the pandemic, and demographics.

Operational intensity and value creation: emphasis on the hands-on management required in life sciences real estate, presenting opportunities for operational excellence and value addition.

Strategic investment opportunity: recognition of the sector as an attractive investment, with a growing role in diversified investment portfolios.

Innovation and collaboration: focus on creating environments that nurture innovation and collaboration among various stakeholders.

Market evolution and adaptability: insight into the sector’s transitioning nature, with evolving needs and opportunities necessitating adaptable strategies.

Sustainability and ESG considerations: growing emphasis on sustainability and ESG factors in investment decisions, reflecting a trend towards responsible investing and sustainable development.

1 and 2: long term drivers plus operational intensity

Our interviewees note the life sciences sector’s distinct characteristics, requiring a more operationally intensive approach than other real estate investments. George elaborates:

“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 market. Another way to add value is by taking on more operational risk. The life sciences sector uniquely allows you to focus on both characteristics.”

George’s view on long-term drivers is echoed by Roger:

“Everything points to life science and health being a massive area of growth.”

Strategic role in diversified portfolios

Life sciences real estate is not going to remain niche. As Rob notes:

“I think that it will become an increasingly important part of investors’ allocations toward alternatives.”

Roger agrees:

“If you think that London and other parts of the UK will tend to follow what’s happened in the States – and the fundamentals driving growth here are, in some cases, better than in the US – then we see opportunities in London, Cambridge and Oxford.”

4. Innovation and collaboration

Facilitating connections between people is important to Lendlease, as Martina explains:

“The MIND area has been envisaged to be a 24/7 location where people can connect and live, work, study, and spend their free time together. This goes along with our philosophy of full commitment to the needs of the final user.”

The scientists we regularly interview agree that a building consciously designed and configured for collaborative work will lead to better innovation.

5. Adaptability

As the sector grows, the ability to adapt to changing needs and technologies will be critical. Toğrul commented:

“We sometimes joke within our company that our motto is to do things that we previously ruled out. But that sort of describes our spirit and the way we look at changes – and once we change, we don’t look back.”

The need for adaptability extends to individual buildings too. One of the interviewees mentioned the “flexible chassis approach – high floor-to-ceilings, vibration controls, vertical ducting, and extraction. And it costs money to build in this flexibility.”

But note: “It is a balancing act because, typically, building in more flexibility equals more cost”.

ESG: a growing priority

The integration of ESG considerations in life sciences real estate is a prominent theme across the interviews. The sector aligns with global sustainability goals, focusing on responsible building practices, energy efficiency, and green technologies. Social and governance aspects are also integral, meaning an emphasis on community, collaboration, innovation, inclusivity, and ethical investment strategies.

As Artem puts it:

“ESG has gone from a moral position to a commercial imperative – important for investors, lenders, planners and occupiers.”

Conclusion: the future of life sciences real estate in Europe

As we reflect on the insights shared by six industry leaders in life sciences real estate, a clear image emerges of a sector poised on the cusp of transformative growth and innovation.

Firstly, the life sciences real estate sector’s resilience and growth trajectory are undeniable. The COVID-19 pandemic, while a challenge, has further catalysed this trend.
Operational intensity and the pursuit of value creation emerge as key themes. The sector’s unique requirements necessitate a hands-on approach.
The strategic role of life sciences real estate in diversified investment portfolios is increasingly evident as it evolves from a niche segment to an integral element of balanced investment strategies.
Innovation and collaboration are at the heart of the sector’s evolution. Creating spaces that foster connections among different stakeholders is vital for sustained growth and development.
Adaptability and flexibility in design and function are paramount. This adaptability extends beyond building designs to encompass broader strategic shifts.

Finally, the integration of Environmental, Social, and Governance (ESG) considerations has transitioned from being a moral choice to a commercial imperative.

In conclusion, the life sciences real estate sector in Europe stands at an inflection point. As it continues to evolve, it will offer a myriad of opportunities for well-informed investors, developers, and end-users alike.