More than half of recent investment in UK life sciences real estate came from investors that had not struck deals in the space before, as competition for assets intensifies and supply remains low.
Data from Savills showed that since the beginning of 2021, £945m of investment, or 52% of the total, came from investors making their first moves in the UK’s life sciences market during that period.
The average deal size from new investors was £39.4m, 27% lower than the £53.9m for the other investors. The average yield was 4.2% for the new investors, slightly lower than the 4.5% for other buyers.
Steven Lang, head of life sciences research at Savills, said: “New entrants are buying a smaller lot size as they’re not able to access bigger lot sizes.”
James Emans, UK investment director at Savills, added: “They have to take a bigger risk to get access to the market because there’s not much core product available. A lot of [new entrants] would love to have purchased whole portfolios, but the reality is that they have to amalgamate a platform piecemeal in order to generate a portfolio.”
The largest deal completed by the new entrants since the start of 2021 was Singaporean sovereign wealth fund GIC’s acquisition of a 40% stake in Oxford Science Park for £160m.
That was followed by two deals that saw Brockton Everlast pick up various buildings on Cambridge Science Park.
Savills said Oxford, Cambridge, Stevenage and Guildford have proved the most desirable locations for new entrants.
Emans said: “The Golden Triangle is the epicentre of the life sciences market, and there will be more new entrants coming into the market.”
Savills has tracked between £10bn and £12bn of venture capital trying to get into the Golden Triangle. Meanwhile, research from JLL and WAPG estimates that there is £20bn of capital waiting on the life sciences sidelines in total.
Lang said: “The global fundamentals of the occupiers that will underpin life sciences going forward are still incredibly strong. I think that if we could get the stock then it would be a pretty healthy market overall.”