COMMENT Over the past couple of years, a notable trend has emerged: the repurposing of office buildings into tech and life sciences hubs. While repurposing space was once deemed unviable, ongoing shifts in office and retail sector occupier demand have prompted investors to look for returns in alternative sectors, such as life sciences.
Repurposing space for life sciences not only meets expansion needs and addresses market demand, it also offers a valuable win for sustainability. Recognising the disparity in supply and demand, fund managers have identified repurposing office spaces into science and tech hubs as a viable solution. This strategic shift presents an opportunity for investors in office properties, previously lacking in returns, to capitalise on a flourishing and lucrative industry.
Welcome to the neighbourhood
The inherent structural characteristics of office and retail spaces make them conducive to this transformation. The conventional layout of office buildings naturally accommodates the requirements of research-focused dry labs, while many office spaces boast designs and ceiling heights suitable for meeting the heating, ventilation and air-conditioning needs for wet labs.
Another significant driving force is the burgeoning demand for life sciences properties in the UK, aligning with the government’s ambitions to foster science and technological innovation. London, in particular, faces a scarcity of available laboratory space, currently meeting only a quarter of occupier requirements.
With the decline for traditional office buildings since the Covid-19 pandemic, many businesses, including Meta, the former occupant of 1 Triton Square, have transitioned to hybrid working models. Consequently, Royal London’s joint venture with British Land to repurpose this building as a best-in-class science and innovation hub while retaining premium office space on the upper floors is both prudent and strategic. The joint venture perfectly aligns with Royal London’s core strategic objectives to maximise value and deliver long-term, sustainable solutions to meet evolving occupier needs. Situated in the heart of the Knowledge Quarter alongside the Francis Crick Institute, the Wellcome Trust, the Alan Turing Institute and University College London, 1 Triton Square is ideally positioned to meet the future space requirements of these occupiers.
However, it is worth noting that not all buildings suitable for repurposing are equally adept. A successful conversion will master the combination of location, access to talent and the building’s structural veracity. Greater floor-to-ceiling heights than those typically seen in existing office buildings are necessary, along with increased floor loadings and power capabilities. The nature and use of laboratories can change drastically in their lifetime and may need frequent adjustments to their layouts, servicing and technology. Further future-proofing for robotics and power-hungry AI and computer analyses must also be considered to ensure the robustness of any investment. Without these considerations, any schemes to repurpose will limit the potential of future lab uses.
Best-laid plans
For investors interested in embarking on brownfield projects and repurposing failing assets, navigating the planning process may prove more straightforward than ground-up development. Since the introduction of class E in 2020, which brought all employment space into the same use class, new planning permission for a change of use may not be necessary, helping to streamline the process like never before, whereas demolishing an existing office building entails navigating a more complex planning journey. Challenges such as limited resources and capacity within planning authorities, coupled with evolving policy issues, can significantly delay or impede projects.
As with any investment, success is not always guaranteed with science and technology projects. Investors in these sectors may undergo multiple rounds of funding without yielding successful outcomes, potentially leading to a divestment from these properties. However, the undeniable growth trajectory of the tech and science industries is evident. While no one can predict the future with certainty, the sustained demand for these spaces suggests that investors are likely to continue pursuing this trend.
Katy Peacock is an associate director at BCLP
