Eamon Fox, partner and head of office agency at the Leeds office of global property consultancy Knight Frank, explains why the life sciences sector is now a vital driver in Yorkshire’s real estate market:
The current Coronavirus crisis has provided a timely reminder of the debt we owe to the UK’s brilliant life sciences industry. But it is important to remember that this industry is not just a global leader in scientific and technological innovation, it is also a jewel in the crown of the UK economy.
Life sciences directly employ almost 250,000 people, consisting of 5,870 businesses and generating an annual turnover of £74bn. The UK has one of the best research environments in the world as exemplified by the fact that 25 per cent of the world’s top 100 selling medicines were discovered in the UK. But the story does not end there.
By 2025 the sector has the potential to add £8.5 billion to the UK economy and deliver 31,400 new jobs as the Government pledges to raise Research & Development spend as a percentage of GDP from 1.69 per cent currently to 2.4 per cent by 2027 and 3 per cent thereafter.
The further growth and evolution of the life sciences sector represents a huge opportunity for the Yorkshire property market. For landlords and developers, understanding what the sector will look like in five years, where the demand will originate from and why, will be vital to fully utilising the opportunity. For those corporate real estate managers within the life sciences sector, the seismic changes within the sector are going to impact every part of the value chain and will require a re-evaluation of global real estate portfolios.
The Yorkshire region is acknowledged as a leader in life sciences and boasts some of the most talented and highly-skilled individuals at world-leading and cutting-edge technology companies. Excellent examples include the pioneering York Science Park, situated in the heart of the University of York, which has nurtured a host of successful life science companies; the Avacta Group, which has just announced a new share subscription to raise £2m; and EMIS Health, which supplies electronic patient record systems and software used in primary care, acute care and community pharmacy across the UK.
At the same time there are hundreds of smaller life science companies in Yorkshire, who are adding to the region’s reputation as a growing hub for technological development and who are occupying – or looking for – flexible, cutting-edge office space in congenial surroundings. They need first-class space to help them address some of the challenges they face, particularly attracting funding to commercialise their products and services.
As the life sciences sector continues to expand, it is vitally important to rethink our understanding of the sector to support its growth trajectory through the 2020s. If we do not, we risk misrepresenting the true size of the market and the drivers of future occupational demand.
The life sciences sector is made up of three core strands: bio-pharmaceuticals; medical technology; and service and supply. These are each connected to an ecosystem of collaborators. We tend to think of life sciences occupiers as the UK’s 700 biopharma businesses such as Pfizer, Novartis, GSK, Merck and Bayer, which in total employ around 63,000 people in the UK and require large-scale laboratories alongside corporate offices.
Medtech, however, is the fastest-growing subsector and already the largest part of the UK life sciences industry, with around 97,600 employees and more than 2,700 businesses. Next-wave technologies and an explosion in healthcare data are driving rapid transformation. No longer solely manufacturing devices and diagnostics, medtech is moving towards advanced technology and AI. Biopharma companies are also increasingly partnering with or acquiring medtech firms.
So what does this mean for real estate? The first major trend is the science and technology cluster. As the tech, medtech and biopharma sectors become increasingly interdependent, they need to be located close together in spaces that aid collaboration and innovation.
Bruntwood, whose Platform development in Leeds is a shining example of how to create 21st century, state-of-the-art offices, and Legal & General Capital are creating a network of innovation districts across the UK that accommodates the needs of both science and technology occupiers and drives collaboration between them. Businesses are gravitating towards these clusters.
Second, medtech disrupters are injecting fresh occupational demand for highly connected workplaces in UK cities with a deep talent pool in both life sciences and technology. Fast-growth SMEs will increasingly need flexible and affordable spaces to grow into, and one of the most compelling requirements for investment is for flexible offices and co-working spaces.
Finally, large technology companies pushing deeper into medtech will drive occupational demand. Last year, Google reorganised its health businesses into Google Health, and was the largest medtech investor, completing almost 100 financing deals, including the $2.1bn acquisition of Fitbit.
The medtech boom is just beginning. Understanding this dynamic sector and delivering the right real estate solution at each growth stage will be critical to fully capturing this opportunity. Demand will be greatest for highly connected, flexible spaces in science and technology clusters that maximise collaboration. It is vitally important that Yorkshire is at the forefront of this revolution.
