Credit: Gorodenkoff/iStockIs European real estate poised to embrace the promising future of life sciences?
As labs move to city centres, we explore the demand for specialised spaces, urban clusters, and navigating complex regulations
January 13, 2025Real Estate
Written by Jorge Aguinaga
During the recent GRI Credit Opportunities & Real Estate Debt 2024 conference, top executives in the life sciences and real estate industries gathered for an exclusive roundtable discussion, sponsored by JLL, to address the emerging opportunities and challenges in the sector.
As industries around the world tackle the lasting effects of the global pandemic, the life sciences sector, including fields like pharmaceuticals, biotechnology, healthcare, and medical research, faces a new challenge: the lack of lab space in major cities.
The UK government’s ongoing commitment to the sector is also a key driver of this growth. In 2023, they invested £650 million through the "Life Sci for Growth" package, in addition to a £100 million public-private health research boost in December 2024 to fund 20 new clinical research hubs. With over 280,000 people employed in the sector, these investments highlight the life sciences sector as a key driver of innovation and economic growth.
A significant factor contributing to the lab space shortage is the need for highly specialised facilities that demand high levels of operational intensity, tailored to specific workflows of scientific research. Wet labs, essential for research that involves chemicals and biological samples, require precise environmental control, specialised equipment, and high levels of safety due to the handling of potentially hazardous materials.
A key characteristic of life sciences occupiers is their long term commitment. Due to the highly specific facility requirements, tenants often stay in the same spaces for extended periods, leading to a growing demand for turnkey assets, where the property is ready for immediate occupancy and tailored to the needs of the tenant.
However, developers face the challenge of ensuring that the spaces they create are flexible enough to accommodate a variety of scientific disciplines while being focused enough to attract premium tenants. This requires a balance between generic designs that appeal to around 80% of the market and specialised features that meet the needs of more specific research endeavours.
These urban clusters provide better ABCD, four key advantages: (A) access to academic institutions; (B) business access to funding; (C) clinics and hospitals; and (D) diverse demographics. These clusters foster collaboration between researchers, businesses, and investors, accelerating the pace of scientific discovery, with universities playing a pivotal role in these clusters, providing a steady stream of talent and acting as incubators for new ideas.
Unlike other sectors, R&D work cannot be conducted remotely. Scientists often need to be physically present to handle experiments and analyse data. Working hours in this field are unconventional; it’s not unusual for experiments to run from late evening to early morning, so access to the workplace is critical.
For scientists, the attraction of urban life science clusters lies not just in the facilities, but in the ecosystem that surrounds them. Talent today demands not just top notch facilities but also quality of life and a broad range of amenities, from bars and restaurants to gyms and recreational spaces, where they can connect with others and exchange knowledge.
That said, it is believed that the UK is still five to ten years behind the US in terms of infrastructure, while Europe is two to three years behind the UK. Despite this, the demand for specialised spaces continues to surge across Europe, especially as cities focus on attracting more companies and talent to their urban clusters.
Certain cities are finding a niche. For example, Munich stands out as a biotech epicentre, focusing on vaccine development as well as cell and gene manufacturing. In Spain, agrotech testing is growing, with around 90% of European testing taking place there.
Barcelona has also built a significant capacity for early stage clinical research, attracting investments that once went to the UK. This has apparently caught the attention of the British government, which has shown great appetite in bringing some of this activity onshore.
While the UK remains ahead in terms of the number of life sciences companies, the increasing interest in real estate across Europe, paired with supportive government policies, may create challenges for institutional investors looking to secure space in these emerging clusters.
In the UK, for example, interacting with government institutions like the Home Office or the Medicines and Healthcare products Regulatory Agency (MHRA) is a fundamental yet complex element to investing in the sector, exacerbated further by the uncertainty brought about by Brexit. Meanwhile, in Europe, issues like reimbursement policies add another layer of complexity for companies trying to navigate these highly regulated markets.
Considering these challenges, the success of the life sciences sector depends on its ability to quickly adapt. Both local government support and real estate strategies are key for growing these urban clusters. Governments must ensure policies stay consistent and encourage innovation, while private investors need to be ready to meet the demand for more specialised lab spaces. If these pieces come together, Europe’s life sciences hubs have the potential to reshape both science and the economy in the coming years.
During the recent GRI Credit Opportunities & Real Estate Debt 2024 conference, top executives in the life sciences and real estate industries gathered for an exclusive roundtable discussion, sponsored by JLL, to address the emerging opportunities and challenges in the sector.
As industries around the world tackle the lasting effects of the global pandemic, the life sciences sector, including fields like pharmaceuticals, biotechnology, healthcare, and medical research, faces a new challenge: the lack of lab space in major cities.
An optimistic future
Despite the potential economic and political challenges in 2025, a recent Deloitte survey shows that 75% of global life sciences executives are optimistic about the year ahead. Similarly, KPMG reports that one fifth of life sciences CEOs expect earnings growth above 5%, while one third anticipate headcount growth of 6% or more.The UK government’s ongoing commitment to the sector is also a key driver of this growth. In 2023, they invested £650 million through the "Life Sci for Growth" package, in addition to a £100 million public-private health research boost in December 2024 to fund 20 new clinical research hubs. With over 280,000 people employed in the sector, these investments highlight the life sciences sector as a key driver of innovation and economic growth.
During the GRI Credit Opportunities & RE Debt 2024 conference, top executives convened for the exclusive ‘In Conversations with Capital: Life Sciences’ session. (Credit: GRI Club)
A significant factor contributing to the lab space shortage is the need for highly specialised facilities that demand high levels of operational intensity, tailored to specific workflows of scientific research. Wet labs, essential for research that involves chemicals and biological samples, require precise environmental control, specialised equipment, and high levels of safety due to the handling of potentially hazardous materials.
A key characteristic of life sciences occupiers is their long term commitment. Due to the highly specific facility requirements, tenants often stay in the same spaces for extended periods, leading to a growing demand for turnkey assets, where the property is ready for immediate occupancy and tailored to the needs of the tenant.
However, developers face the challenge of ensuring that the spaces they create are flexible enough to accommodate a variety of scientific disciplines while being focused enough to attract premium tenants. This requires a balance between generic designs that appeal to around 80% of the market and specialised features that meet the needs of more specific research endeavours.
The rise of urban clusters
Another driving force behind the demand for lab space is the concept of "clusters". These are geographic concentrations of life sciences companies, research institutions, and academic centres that create a thriving ecosystem of innovation. Cities like London, Paris, Berlin, and Barcelona are increasingly becoming epicenters for research.These urban clusters provide better ABCD, four key advantages: (A) access to academic institutions; (B) business access to funding; (C) clinics and hospitals; and (D) diverse demographics. These clusters foster collaboration between researchers, businesses, and investors, accelerating the pace of scientific discovery, with universities playing a pivotal role in these clusters, providing a steady stream of talent and acting as incubators for new ideas.
Unlike other sectors, R&D work cannot be conducted remotely. Scientists often need to be physically present to handle experiments and analyse data. Working hours in this field are unconventional; it’s not unusual for experiments to run from late evening to early morning, so access to the workplace is critical.
For scientists, the attraction of urban life science clusters lies not just in the facilities, but in the ecosystem that surrounds them. Talent today demands not just top notch facilities but also quality of life and a broad range of amenities, from bars and restaurants to gyms and recreational spaces, where they can connect with others and exchange knowledge.
Around 90% of European agrotech testing takes place in Spain. (Credit: Tonefotografia/Adobe Stock)
Life sciences across Europe
Cities like London have established themselves as key players, with Kings Cross, White City, and other districts becoming prime locations for cutting edge life sciences development. As a result, urbanisation of life sciences is becoming a dominant trend, making these cities even more appealing for startups, big pharma, and biotech companies. Other cities such as Paris, Berlin, and Barcelona are also becoming increasingly attractive due to their growing research hubs.That said, it is believed that the UK is still five to ten years behind the US in terms of infrastructure, while Europe is two to three years behind the UK. Despite this, the demand for specialised spaces continues to surge across Europe, especially as cities focus on attracting more companies and talent to their urban clusters.
Certain cities are finding a niche. For example, Munich stands out as a biotech epicentre, focusing on vaccine development as well as cell and gene manufacturing. In Spain, agrotech testing is growing, with around 90% of European testing taking place there.
Barcelona has also built a significant capacity for early stage clinical research, attracting investments that once went to the UK. This has apparently caught the attention of the British government, which has shown great appetite in bringing some of this activity onshore.
While the UK remains ahead in terms of the number of life sciences companies, the increasing interest in real estate across Europe, paired with supportive government policies, may create challenges for institutional investors looking to secure space in these emerging clusters.
Overcoming stringent regulation
Despite the great potential in life sciences real estate, it’s important to recognise the complexities involved. The sector is one of the most heavily regulated, meaning companies must constantly navigate various government policies, greatly varying from country to country.In the UK, for example, interacting with government institutions like the Home Office or the Medicines and Healthcare products Regulatory Agency (MHRA) is a fundamental yet complex element to investing in the sector, exacerbated further by the uncertainty brought about by Brexit. Meanwhile, in Europe, issues like reimbursement policies add another layer of complexity for companies trying to navigate these highly regulated markets.
Considering these challenges, the success of the life sciences sector depends on its ability to quickly adapt. Both local government support and real estate strategies are key for growing these urban clusters. Governments must ensure policies stay consistent and encourage innovation, while private investors need to be ready to meet the demand for more specialised lab spaces. If these pieces come together, Europe’s life sciences hubs have the potential to reshape both science and the economy in the coming years.
