Venture capital investment in the UK life sciences sector slowed in the first half of 2022, in line with the global trend, but demand for life sciences real estate has proved robust.
Data from Savills show that £1.6bn of venture capital was invested in the sector, covering biotech, pharma and medtech. This is down by a half from £3.2bn invested in the first half of 2021.
Despite the slowdown, Savills still believes that the “wall of capital” raised in the UK will continue to support companies’ growth in the coming years, in turn underpinning demand for real estate.
Steven Lang, head of life sciences research at Savills, said: “With headwinds and lower levels of positive sentiment within the broader capital markets, in response to a potential recession, the war in Ukraine, energy crisis and inflation, it is no surprise to see that flow of venture capital is lower for the first half of 2022.”
Real estate demand has remained strong across Oxford, London and the South East, with take-up standing at 629,374 sq ft for the half year, up 11% year-on-year. Take-up for 2021 reached 887,220 sq ft across those regions.
Oxford and Cambridge continue to account for the largest share of the total, at 62% as of mid-2022. Greater London and the South East saw a 75% fall in take-up to just 16,470 sq ft, while in central London take-up rose by 50% to 219,713 sq ft.
Lang said: “The Greater London and South East market, which excludes Oxford, has shown lower levels of take-up – this has been driven by fewer deals for corporate space being acquired, specifically along the M4 corridor.
“Given the nature of the business function in the offices along the M4 – marketing, sales, HR – it is likely that life sciences companies have enough space at present, as they will be working on a hybrid strategy for staff – the need to be in the office is not as important as their scientists being at their bench in a laboratory.”
A further 4.5m sq ft of requirements currently remains unsatisfied across London, Stevenage, Oxford and Cambridge. Savills said it expects those core markets to achieve a combined take-up level of between 800,000 sq ft and 900,000 sq ft in 2022.
Lang said: “We think there is potential upside to this as we expect pre-letting activity to increase. The number of life sciences enabled schemes coming through the development and refurbishment pipeline will provide the opportunities for companies to secure the best space for their needs as they grow.”
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