British Land’s capital markets event this week focused on redeveloping existing assets into lab space for the high-growth science & technology (sci-tech) sector.
More than just traditional life sciences, the sector also encompasses green & physical sciences, data, artificial technology (AI) and technology and already accounts for around 15% of the UK economy.
One of the key requirements for real estate companies targeting this sector is both geographical focus and flexibility with the space offering – from floor-plate size, dry/wet labs, and fully-fitted or lab-enabled optionality.
London is the European epi-centre for AI and technology and also boasts leading universities and research institutions clustered around Euston Road in the so-called Knowledge Quarter.
Other clusters are concentrated around the universities of Cambridge and Oxford, forming the ‘Golden Triangle’ in conjunction with London.
Office conversions – high barriers to entry: Given the initial requirement to have the right geographical positioning, office-to-sci-tech conversions are still limited.
However, even if the location is right there are physical constraints to converting existing offices.
These include large power requirements, ceiling heights (ideally 4m), ventilation, drainage, large basements and easy access (for chemical deliveries etc).
Having all of the above requirements gives possible conversion opportunities for existing office space or redevelopment – something British Land is actively underway with at Regents Place and within the Golden Triangle for specialist Life Science REIT.
The upside for rental levels over existing office space is compelling.
Lab-enabled space in Regent’s Place typically commands a 20% premium over conventional workspace and even higher premiums for fully fitted.
There is also potential for yield compression, suggesting the benefits of re-development therefore look highly attractive, concludes Shore Capital.