Life sciences occupiers are taking longer to execute expansion plans amid a shift in the types of funding they receive, according to research by Carter Jonas.
Although funding secured by businesses in the sector reached $5.9bn (£4.8bn) as of 30 June, which is above the $4.6bn recorded for the whole of 2022, it is unlikely to exceed the $17.5bn recorded in 2021. Like previous years, funding in the key life sciences markets of Oxford, Cambridge and London accounted for the majority of the investment, with a combined $5.4bn.
Where is the money coming from?
Carter Jonas’s research has tracked a dynamic shift in the types of funding received by life sciences companies when compared with previous years, with capital coming from private equity rounds dropping to virtually zero.
Elsewhere, debt funding secured by life sciences companies totalled $3.8bn in H1 2023, a significant leap from the $82.7m in H1 2022 and $160.5m in H1 2021. However, that figure was highly inflated by AstraZeneca, which priced a $3.75bn bond offering in the period. Excluding the AstraZeneca deal, the total funding in this category was around $50m, representing an almost 40% decline year-on-year.
Matt Lee, head of science and technology at Carter Jonas, said: “Weaker overall funding and the current economic climate mean that companies of all sizes are taking longer to make property decisions.
“Companies are continuing to take space and expand, and the sector remains more resilient compared with others, but they are taking longer to execute expansion plans, which could translate into slower occupier activity in the upcoming months.”
Focus on fitted facilities
A lack of high-quality stock is putting further pressure on transaction levels, according to the agent, with relatively few schemes expected to bring new space to market in the next 12 months.
According to construction data provider Glenigan, there are currently 97 life sciences projects with plans approved across the UK, with a total value of nearly £6.4bn.
The most notable projects completing later this year include the Iversen Building at Oxford Science Park. In Cambridge, building 960 at Babraham Research Campus, alongside buildings A1 and B at Unity Campus, and One Granta at Granta Park in Cambridge, are all set to get off the ground in 2024.
Carter Jonas’s report has also found a growing number of developers are moving towards the provision of fully fitted facilities.
Lee said: “There is an increasing focus on the inclusion of fitted lab space within schemes because of the advantages offered to both developers and occupiers.
“On the developer side, it shortens the length of time between agreeing a deal with a company and occupancy and allows for greater control over the space being created. Equally, for occupiers, it helps to reduce the up-front cost of entry, enabling them to maximise their funds.”
Looking back at take-up in H1 2023, the research found demand for various types of stock have differed across the key life sciences markets.
In Oxford, occupiers have favoured hybrid facilities, take-up of which accounted for 39% of all deals, closely followed by lab take-up, totalling 35% of transactions. The remainder of completed deals were for office space.
In contrast, in Cambridge, offices were the most preferred type of facility among the life sciences occupiers, totalling 70% of all deals in H1 2023. Lab take-up accounted for 26% and the remainder of transactions were for hybrid facilities.
Lee said: “Cambridge currently has no available laboratory space for rent, after demand surged by almost a quarter in H1 2023. As a result, many companies are being forced to lease offices and other commercial buildings before refitting them as laboratories.”
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