When the Ellison Institute of Technology (EIT) bought a 5.9 acre plot in Oxford in December 2021, it was the culmination of what had been a tough competitive process to acquire a prime life sciences location.
An adjacent plot on Oxford Science Park was acquired six months later, and the assembled site will be the home to EIT Oxford, a major new interdisciplinary research and development facility that will support EIT’s mission to develop and deploy technology in pursuit of solving humanity’s most challenging and enduring problems.
EIT Oxford will drive scientific and technological innovation in four key areas: health and medical science, food security and sustainable agriculture, climate change and clean energy, and government innovation in the era of artificial intelligence.
Set for completion in 2027, the EIT Oxford state-of-the-art campus will include 30,000m2 of research laboratories, an oncology and preventative care clinic and educational and meeting spaces that reflect EIT Oxford’s hugely ambitious science and technology programmes. The new facility will further EIT Oxford’s current partnership with the University of Oxford and become the new home for the Ellison Scholars Programme.
The facility has been designed by renowned British architect Lord Norman Foster with a focus on creating a truly collaborative and nurturing environment. A primary objective was to break down barriers between researchers, scientists, clinicians and patients, creating a human-centred and holistic approach to healthcare and technological innovation.
While Ellison, who co-founded Oracle, maintains a personal interest in the campus, the deal and project permeates the wider life sciences market and underscores the UK’s global role in life science research and development. This is also a move that strengthens EIT's existing links with the Tony Blair Institute for Global Change.
“It's the life sciences deal everyone's talking about, and is hugely significant for both Oxford and the UK,” says Tom Calnan, Partner, Trowers & Hamlins.
The strength of interest in the Oxford site also highlights the investment potential. Oxford and Cambridge Universities, alongside London’s educational institutions such as Imperial College and UCL, form a ‘golden triangle’ of science and tech-focused knowledge.
There has been renewed interest in the UK life science sector since the race to develop a Covid vaccine. The Oxford-AstraZeneca vaccine developed by Oxford University and pharmaceutical giant AstraZeneca was among the first to be approved.
While life sciences is currently a niche asset class within real estate, the sector’s important role and potential within the UK economy means it attracts Government support.
The Spring and Autumn budget announcements last year included provision for life science funding. In May 2023, the then Conservative Government announced a “£650m war chest” to “fire up the UK’s life sciences sector”.
Then, in the Autumn Statement, an additional £520m investment package was announced to support UK life sciences manufacturing.
Speaking last year, former Chancellor Jeremy Hunt said: “Our life sciences sector employs over 280,000 people, makes £94 billion for the UK each year and produced the world’s first Covid vaccine.
“These are businesses that are growing our economy while having much wider benefits for our health – and this multi-million pound investment will help them go even further.”
Government support for life sciences is cross-party. Earlier this year, two former leaders from the Labour and Conservative parties, Tony Blair and William Hague, came together to launch a report on the future of the life science sector and its potential for growth in the UK.
The report advocates ways to maximise the value of UK science expertise by harnessing funding, data and AI technology.
AI is a rapidly emerging area of development for life sciences, helping to improve medical diagnosis and treatments. The UK is also sitting on a valuable asset that could drive AI-led research: National Health Service (NHS) data.
Selling anonymised NHS data is something the Blair-Hague report calls for to support research and development in health and medicine and drive economic growth. Privacy concerns among the UK public would need to be allayed first, but the idea was supported in the Labour party's sector plan launched in January this year. As the Labour party is now in government, it has the chance to put that plan into action, including its ‘commitment to grow the sector to its full potential’. It aims to do this by, for example, taking a long-term approach to public funding. This would involve setting 10-year budgets for R&D institutions such as UK Research and Innovation.
Its R&D funding commitment also aims to include creating a more streamlined funding process and increasing the number of spinouts from universities through an innovation funding structure that can allow more of them to scale up successfully.
This recognises that the quality and reputation of the UK’s universities contribute to the buzz around the UK’s life science sector. Cambridge and Oxford Universities rank second and third in the world for life sciences, according to The Times Higher Education.
All this supports demand from life science businesses for suitable space.
However, life science real estate isn’t immune to the investment and development challenges that other real estate sectors face, such as the high cost of debt.
Previous investment strategies used for property assets, such as buy, hold for 2-4 years, and sell for a profit, don’t deliver the same returns now.
And investing in new life science developments still requires close scrutiny of construction costs, which have risen in the last few years.
“There will be capital returns for life science real estate investors if you're patient enough, which is partly because of the supply and demand imbalance,” says Calnan. “Investing in development also presents an opportunity with the right occupiers and the right funding.”
“For investors with a capital overflow who are prepared perhaps to take a medium-term view on refinancing, there are also opportunities to get into this sector.”
As a relatively new sector, the lack of benchmarking for pricing and difficulty in tracking some covenants can be off-putting for investors.
However, there are other credentials in the sector's favour. Calnan explains: “The nature of the sector means that there is often significant capex spend at the outset of any occupation. As a result, tenants tend to occupy for the long term and pay relatively high rents.”
While Oxford, Cambridge and London are the top-tier locations for life sciences, there are also growing hubs in Manchester, Newcastle and Glasgow.
A commercialisation gap also creates an investment opportunity. “We invent prolifically in the UK but historically don’t exploit those inventions well at all; those inventions and technologies get bought and exploited by other countries, particularly the US,” says Nick Green, Partner, Trowers & Hamlins. “The last government commissioned a review of the capital markets, the structure of which also plays a significant role, however there is clearly a real estate opportunity here too”.
One final consideration is ESG. Life science businesses are looking for buildings with good ESG credentials, as are funds, and that affects value. This factor will only grow in importance as building energy and sustainability regulations get more stringent to meet the 2050 net zero carbon targets.
“Commitment to ESG is the direction of travel for the UK, and ignoring that when making investment decisions will have an impact on future returns,” says Green.
When it comes to life sciences, the UK has stronger fundamentals than most. These fundamentals are now reflected in the potential for investment opportunities and the life sciences sector seems set to grow and grow.
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