According to Savills, take-up of science related real estate across the golden triangle of London, Oxford and Cambridge totalled 674,000 sq ft in H1 2023, 36% above the five year average. Whilst this is a 16% decrease on the 800,000 sq ft recorded in the first half of 2022, this can largely be attributed to the significant 195,000 sq ft pre-let to MSD in King’s Cross in May last year.
Savills notes that as much as 396,000 sq ft of the total transacted across the region was for laboratory space alone, up 111% on the five year average. Notably, in Oxford and Cambridge, lab take-up reached 240,000 sq ft and 120,000 sq ft respectively, which is the highest level ever recorded in the first half of the year.
Key deals across the region in H1 2023 saw Moderna pre-letting 145,000 sq ft at Harwell Campus and Ryze Hydrogen acquiring 23,000 sq ft at North Bailey House, both in Oxford. Whilst in London, MSD pre-let a further 12,000 sq ft in King’s Cross at Sky Lab at the Francis Crick Institute.
At present, there is 449,000 sq ft of science related space under offer within the golden triangle, which highlights the resilience of the sector despite ongoing economic headwinds impacting the real estate market. Consequently, Savills anticipates that the second half of the year will see more encouraging levels of take-up, not just in relation to space under offer, but also due to good levels of active demand generally.
What’s more, the value of venture capital (VC) raised in the life science sector, by companies headquartered in the golden triangle, amounted to £966 million in H1 2023. This is 28% lower than the level recorded in the first half of last year. However, this figure is only slightly lower than the five-year average, a period that includes the 2021 and 2022 H1 total highs of £2.5 billion and £1.3 billion respectively. Savills has calculated that the first half of 2023 remains higher than any year prior to 2021, which is positive and will support further occupier demand in both the short and medium term.
From an investment perspective Savills has recorded £320 million of assets traded or under offer across the golden triangle in H1 2023. Whilst this is considerably down on last year’s H1 total of £850 million, this can be attributed to the challenging economic conditions affecting all capital markets. Looking ahead, there is currently £700 million of science related stock being marketed. Savills is confident that will translate into transactions in the second half of the year as investors remain keen to deploy money into the sector.
Tom Mellows, head of UK science at Savills, comments: “The first half of the year has remained positive for the sector, notwithstanding the macroeconomic issues impacting the market. It is promising to see transactions for laboratories increasing, as we see occupiers start to benefit from new development of purpose built space across the region. Undoubtedly, the more challenging funding market will lead to difficult decisions for some, but this should ultimately see interesting trends emerge, including greater collaboration between big pharma and start-up firms.”