Over recent years the appetite for “alternative” property investment opportunities has grown exponentially, with demand in the life sciences sector accelerating in light of Covid-19. Life sciences has been well established in the US for more than two decades (with specialist clusters in Boston-Cambridge, San Francisco and San Diego) and is becoming increasingly topical in Europe and in the UK and Ireland in particular.
The weight of capital targeting opportunities in this niche sector in the UK was best demonstrated by the recent sale by Legal & General of five buildings at Cambridge Science Park outside London for £100 million (€116m). The fact that there were more than 20 underbidders for this opportunity, which traded for well above its guide price, gives a sense of the volume of capital targeting the emerging life sciences sector.
Ireland boxes above its weight in biotechnology and pharma, being the world’s third largest exporter of pharmaceuticals, with more than 85 pharma companies based here (including nine of the top 10 global pharma companies), as well as having the highest proportion of Stem (science, technology, engineering and mathematics) graduates per capita in the EU and some of world’s best universities. It is therefore no surprise that international investors have been turning their sights to identifying life sciences investment opportunities in Irish cities.
There are many facets to life sciences from a property perspective, including pharma/medtech and biopharma companies occupying or owning traditional office and industrial buildings/campuses; life science R&D facilities (combining offices with specialised wet or dry laboratory space, typically located beside major universities, research institutions and hospitals); and specialist manufacturing facilities.
Each of these offers opportunity in their own right, both from an occupational and investment perspective, albeit many specialist life sciences facilities in the Irish market are owner-occupied, so unlocking investment opportunities is not straightforward. Some investors target opportunities to acquire buildings with pharmaceutical/medtech tenants or look to identify sale-and-leaseback opportunities of owner-occupied stock. Others focus on acquiring land that lends itself to the development of bespoke life science facilities (generally very high specification buildings that are rarely developed speculatively considering the requirements of end users). Others look to partner with third-level institutions or enter joint venture arrangements with specialist operators/developers.
Investors undertaking due diligence focus on metrics beyond traditional economic, demographic and real estate datasets, with information on university research initiatives and funding; the availability of specialist talent; venture capital funding; government supports and the availability of incubator facilities as important as traditional underwriting metrics. I firmly believe we will see the emergence of life science clusters in Irish cities in due course. In any event, we can expect to see Ireland’s first life science real estate transactions occurring in the very near future.
Marie Hunt is executive director and head of research at CBRE Ireland