Spotlight: European Life Sciences

Ageing populations, rising demand for digital health and the Covid-19 pandemic have boosted R&D investment into the life sciences sector, spurring investor demand for office and laboratory facilities

What is driving life science growth?

Mike Barnes, European Research, explores the key drivers behind life sciences and what this means for future occupier demand

Life sciences covers a wide range of medical fields including biotechnology, pharmaceuticals, biomedical research, with an increasing focus on applied sciences such as cell and gene therapy (CGT) and genomics. As an R&D-intensive sector, technological advancements have accelerated progress and opened up new ways to improve human health.

Thanks to medical advances, people today are living longer and are healthier. Even people with pre-existing conditions and chronic or long-term diseases can now live more actively for longer. The ageing population is driving the continuous development of preventive treatments, prescription drugs and innovations in all areas of life sciences and the development of advanced medical devices. We have also observed a trend towards personalised solutions and e-health methods.

Life sciences encourage investors to develop their portfolios around the ‘triple helix’ of government, universities and industry to create ecosystems. More recently, this has expanded to a quintuple helix, focussing on societal and environmental benefits, with proximity to high-quality teaching hospitals essential.

The World Economic Forum’s Global Competitiveness Index outlines the strength of University-Industry collaboration in R&D. Switzerland leads the ranking, with Finland, the Netherlands, UK, Germany, Belgium and Sweden all featuring in the top 10. Real estate ultimately responds to these requirements from incubators and accelerators to global R&D headquarters.

What is driving growth?

Ageing demographics has attracted new funding into Europe’s major life science markets. The European Union’s population aged 65+ is expected to increase by 18% from 94 million to 111 million over the next 10 years according to Oxford Economics.

This is contributing to a rise in demand for healthcare services, drug discovery and development of more personalised medicines. The coronavirus pandemic has brought life sciences into the spotlight for investors, however, the supply side drivers, including investment into digital health, will help to drive growth.

Covid-19 has been the catalyst for enormous additional funding for R&D and medical care around the world. In response to the pandemic, European Commission leaders agreed on a NextGenerationEU stimulus package totalling €1.8tr to rebuild Europe’s economy, with a focus on health programmes and digital transitions.

Savills calculates that for every €1bn of venture capital investment, this creates 46,000 sq m of life science demand – we therefore anticipate approximately 474,000 sq m of new requirements from the life sciences sector will emerge between 2021–22

Mike Barnes, Director, European Research

Spending on health care is an important driver of investment in life science R&D. This spending will only increase as governments seek leadership in addressing the challenges and demands of an ageing population. The latest data from Eurostat shows that, with the exception of Greece, all European countries increased health expenditure between 2012 and 2017, some by over 20 percent. At 11.2%, Germany has the highest health expenditure in relation to gross domestic product, alongside France and Switzerland, whereas the EU-27 average is 9.9%.

In response to the vast levels of funding into the sector, 2020 patent applications data from the European Patent Office (EPO) indicates a 10.2% annual increase in pharmaceutical and a 6.3% increase in biotechnology applications, despite overall applications falling by 0.7%. With this coinciding with a number of 'patent cliffs' emerging towards the start of 2021, this will increase R&D opportunities and increase demand for real estate space to effectively deliver the products.


In Europe, the UK is home to five of the top ten life sciences universities, led by Oxford and Cambridge universities, although we have seen more mainland European markets rise up the rankings in more recent years. ETH Zurich (Switzerland), Wageningen University (Netherlands), Karolinska Institute (Sweden) and LMU Munich (Germany), feature among the top ten European universities in 2021 as ranked by the Times Higher Education. Due to the importance of the triple helix of government, universities and industry to deliver on a specific aim and its impact on employment prospects, many university graduates remain in the wider municipalities upon graduation.

Indeed, as well as the access to talent, global occupiers focus on the cost of talent for their operations. Comparing the average cost of employing a life scientist worldwide, most major European countries provide a discount to many of the established US cities. UK cities are relatively cheap compared to the leading global cities, whilst teaching standards of European universities also rank favourably. Basel stands out as one of the more costly markets to employ workers, however, over 700 life science companies and 32,000 employees are active in Basel’s pharmaceutical industry given low tax rates and a growing focus towards digital health continuing to boost the market.

Venture capital investment

Corporate investment helps to indicate the level of future real estate demand in the sector. European life science companies attracted €21bn of venture capital (VC) funding in the last five years. The UK accounted for over a third (€7.6bn), although we are seeing a higher allocation of capital targeting mainland European markets in more recent years, with Germany (€3bn), Switzerland (€2.7bn), France (€2.3bn), Belgium (€1.6bn) and the Netherlands (€1.3bn) boosting investment growth.

That said, Europe still lags behind the largest global life science hubs led by San Francisco, San Diego and Boston/ Cambridge, Massachusetts by volume of capital invested. The US has accounted for 68% of global VC flows over the last five years. Investment into China has spurred Asia’s growth, which now accounts for 14% of global investment, gaining ground on Europe’s share of 16%.

Europe set for record occupier demand

Global pharmaceutical companies are now increasingly expanding into Europe due to attractive tax incentives and access to talent. Over €100bn was invested as R&D spend in 2019 (latest data available from the European Commission), with over €33bn in the UK through the likes of GSK and AstraZeneca, €30bn in Switzerland including Roche, Takeda and Novartis and €12bn in France including Abbvie, Sanofi and Servier.

Impact on office demand

We usually see real estate requirements arise between 12–18 months after a company receives corporate funding. Savills determines future ‘latent’ occupier demand by tracking VC investment data as a lead indicator.

According to Pitchbook, €13.2bn of life science VC data was raised in European headquartered companies between 2014–18, resulting in over 650,000 sq m of office and lab deals across selected European life science markets between 2016–20. Savills calculates that for every €1bn of VC investment, this creates 46,000 sq m of life science demand. Rolling this forward, the €10.2bn of capital invested during 2019–20 indicates approximately 474,000 sq m of new requirements from the life sciences sector will emerge between 2021–22.

The nature of life science occupier activity often mirrors that of VC investment patterns into the sector. Compared to traditional office occupiers, drug discovery companies will have a higher element of 'hit or miss', although once a start-up receives the breakthrough, then we see accelerated growth in demand for space from the individual occupier. More drug discovery companies are adopting AI in order to improve their success rates.

Of course, life science occupier demand is not dictated by VC investment alone, as higher value government initiatives and private equity/ M&A activity contribute to a number of large-scale occupier deals. What’s more, as leasing visibility becomes more transparent, we anticipate the impact will be observed more widely across Europe, beyond our selected markets.

Life science occupier requirements vary to a large degree depending on the R&D success rate, making it vital for occupiers to have the flexibility and growth options to remain on the campus.

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