Corporate investment in life sciences in EMEA grew by an exceptional 72% in 2020 as companies on the front line of the global response to the pandemic ramped up their business activity. This points to a need for property owners and developers to consider the readiness of their assets to support the aspirations of fast-growing life science companies and for investors to pay close attention to the emergent life science clusters, according to Colliers.
The firm has just published a report which examines the surge of investment into life sciences and its implications for the property sector across the EMEA region. The report, which identifies landlord and investor opportunities, says points out that corporate interest in life sciences has been strong for the past decade, with $81.5 billion invested across EMEA since 2010. Job creation has been consistently above 5% year on year.
Since 2010, 59% of capital investment ($33.6bn) has has been directed at manufacturing of pharmaceuticals and medical devices, while 11.4% ($15.5bn) has gone into R&D.
Existing life science clusters have dominated corporate investment, accounting for 67% of activity across Europe.
Ireland a magnet for corporate funds
The Republic of Ireland’s benign tax environment within the EU and multi-billion-euro support for the sector have made it a particular magnet for corporate funds. Other well-established hubs include the UK’s London-Oxford-Cambridge “Golden Triangle”, Zurich in Switzerland, Germany’s Bio-Valley, Flanders in Belgium and Medicon Valley in Copenhagen.
New clusters are emerging, particularly in Spain, Italy, Russia, Poland and Hungary which each surpassed $1bn of corporate investment in the last 10 years and now feature among the top 20 destination countries.
“The life sciences sector is clearly focused around key clusters of expertise and talent, but new locations are expanding, driven by the need of corporates to optimise their footprint and tap into growth markets as the sector expands significantly in relation to traditional industries,” said Damian Harrington, Colliers’ head of global capital markets research and EMEA head of research. “The decision by the G7 economies to fix corporate tax at 15% is another factor that is going to re-draw the corporate map, eroding the advantage of some countries and increasing that of others,” he added.
Harrington pointed out that while Ireland has seen the largest proportion of corporate investment the investment/jobs-created ratio is over four times that of the next biggest cluster, the UK’s Golden Triangle and is 28 times the cluster average.
Future corporate investment is expected to correspond more closely to the underlying size of each market and its quality and depth of talent pool, Harrington said. “This will drive demand for life science real estate assets and opportunities in established and emerging clusters.”
Limited supply of suitable buildings restricts growth of life-science footprint
The rush of investment last year has not yet translated into an expanded life science footprint in Europe, and employment rose only 5% over the course of 2020, a mismatch between financial and physical expansion which reflects a limited supply of the necessary specialised, multi-functional buildings.
Life science occupiers typically require highly specialist and customised facilities and the development community needs to ensure they are at the cutting edge of building innovation, Colliers said.
Supply is expected to catch up with demand as investment managers diversify into life sciences real estate and Colliers expects investment volumes to rise from the 1% annual average of the last cycle to closer to 5% in the new investment cycle.