Life sciences take-up in the UK’s ‘Golden Triangle’ of London, Oxford and Cambridge was c.186,000 sq ft in the first quarter of 2024, according to Knight Frank. This was up 25% year-on-year as the sector continues to mature.
Further supporting the demand for more space, government initiatives to solidify the UK’s reputation as a science and innovation powerhouse have prompted significant corporate investments in both new and upgraded facilities.
According to the latest research by Knight Frank, life sciences take-up in Oxford was c.142,000 sq ft in Q1, 215% above the five-year average and up more than 900% versus the previous quarter, while London life sciences take-up increased 48% versus Q4 2023 to c.23,500 sq ft, both positive increases despite still showing relatively modest overall take-up. Meanwhile, Cambridge take-up decreased 86% quarter-on-quarter to 20,000 sq ft.
Key leasing deals during the period included Diamond Light Source expanding its presence by c.64,325 sq ft at its Harwell Campus in Oxford and invoX leasing the entire lab-enabled 20,000 sq ft Franklin Building at Granta Park in Cambridge on a short-term basis, ahead of a planned repositioning.
Looking ahead, named demand across the Golden Triangle for life sciences lab space stands at c.1.66m sq ft, indicative of resilient requirements from life sciences occupiers for lab space in the UK’s leading markets. The life sciences sector witnessed a 14% increase in venture capital funding, reaching approximately £752m in Q1.
Knight Frank stated: ‘This highlights the sector's sustained allure to investors, particularly in contrast to the 43% quarter-on-quarter decline in UK-wide VC funding. Nevertheless, a reduction in the number of VC deals suggests a trend towards more discerning investment choices amidst wider economic uncertainties, potentially leading to interim deferment of acquisitions as additional funding is secured.’
The science sector is undergoing a diversification of demand sources. 60% of VC funding deals in the first quarter of 2024 were in the fast-growing MedTech sector, including digital health, while the growing role of climate tech and space sectors, amongst others in the UK economy are spurring demand for innovation accommodation in some of the country’s leading science and innovation hubs. The UK Space Agency, for example, is launching its new headquarters at the Harwell Science Campus Space Cluster in Oxfordshire and expanding with offices in Scotland, Wales, and the Midlands.
London’s educational ecosystem is also a source of new demand for life sciences real estate. London’s universities collectively produce a spin-out company for every £35.5m invested in research and development, which compares favourably to Boston (£60.4m), Los Angeles (£42.6m) or New York City (£54.5m).
London is now the headquarters location of 40% of the UK life science companies that secured investment in 2023, and large pharma companies are gravitating towards the capital. Novo Nordisk, for example, has announced plans to open a new AI-based research facility to advance drug discovery operations in King’s Cross, while GSK has 140,000 sq ft at The Earnshaw for its new headquarters, bringing the business in close proximity to the R&D it collaborates on with UCL and other institutions in London.
Available lab space, however, remains constrained in all markets. Across the Golden Triangle, just over 400,000 sq ft of space was available at the end of Q1, though this imbalance is due to be partially alleviated by the end of this year with c.1.37m of space set for delivery in 2024 across the three markets.
Jennifer Townsend, research partner at Knight Frank, says: “Private and public sources of capital are supporting the sectors growth. This is evidenced by a spate of substantial recent investments in the life sciences manufacturing sector.
“Key developments include AstraZeneca’s expansion efforts in Speke, GSKs £200m investment in its UK manufacturing operations, and the grants aiding the expansion of Almac and Ortho Clinical Diagnostics manufacturing facilities in the UK. Complementing these developments, the Spring Budget has introduced various R&D funding measures and further plans to stimulate patient capital investment in the UK's high-growth firms. Efforts are also underway to streamline the IPO process in the UK. These initiatives should sustain and in time grow demand for spaces tailored to innovation. Nonetheless, this growth trajectory hinges on overcoming specific obstacles, such as the limited life sciences expertise among investors and the prevailing preference of UK life sciences entities to list on international stock exchanges.”
Emma Goodford, head of life sciences and innovation at Knight Frank, adds: “Despite a challenging macroeconomic environment, we are continuing to see international capital target exciting new ventures in medical research and technology. This investment is driving demand for lab and office space in the UK’s Golden Triangle, where the existing education, research and development ecosystems are attracting an increasingly diverse array of high-growth businesses seeking flexible space capable of supporting their growth.
“However, for the biotech sector, without further investment and development to deliver high-quality new lab and office space in these core innovation hubs, the growth of life sciences start-ups close to the UK’s leading academic institutions will be stifled when venture and other forms of funding are unlocked, as is forecast towards the end of this year and into 2025.”
