Over the past few decades, the Thames Valley has established itself as a hotbed of pharmaceutical science, but while office space to house pharma firms is bountiful, laboratories have been hard to come by.
But with a new science park on the horizon, could that be about to change?
Thames Valley Science Park has got off to a flying start, with three tenants signed up to its Gateway Building only five months into construction. Heads of terms are also out for a fourth tenant to occupy all of a second building of 30,000 sq ft.
The inaugural tenants of the 48,292 sq ft Gateway Building - which is due to be completed in August 2017 - will collectively occupy a third of the building in Shinfield, south east of Reading just two miles from the Whiteknights campus of the University of Reading, which owns and operates the development.
While tenants Biointeractions and the International Food Network will relocate from the Science & Technology Centre at Whiteknights to the £36m Gateway, the coup for the university was to attract Menarini Pharma - a company founded in 19th-century Florence - which will carry out pioneering cancer research on the site.
“Menarini is a success story: it came to us when it could have gone anywhere in the UK,” says David Gillham, executive director of the Thames Valley Science Park. “They are already in the UK for sales and distribution for their products [in High Wycombe]. But what they will do with us is research and development into cancer. They could be based either in the UK or the US, but they concluded that the Thames Valley Science Park would be their location.”
The International Food Network was taken over by US company Covance last year and tests and develops food under contract, while Biointeractions - which will double its floorspace when it relocates - tests the coatings on artificial hips to ensure they are not rejected by the body.
We need you! Property Week - the only property title with dedicated coverage of regional markets - will be setting up a number of panels made up of small groups of local experts who will help to inform our content so that we can ensure we publish the very best coverage of your region. If you are interested in becoming a panellist and contributing your insights and ideas on a regular basis, please contact Mia Hunt for more information.
Scientific research has historically tended to fit more naturally into Oxford, Cambridge and London, making the three arrivals at Shinfield all the more significant. By operating from the Thames Valley, the new tenants are expected to benefit, in part, from close proximity to a number of sales and marketing companies.
Gillham is confident that more research companies will make the switch. He sees them taking between 5,000 sq ft and 7,000 sq ft under flexible all-inclusive leases that include service charges.
“The terms will be more flexible than you might now see in the marketplace, because it is about responding to a company’s agility,” he explains. “These are companies whose requirements are likely to change and they don’t want to be tied into a five- or 10-year lease. It doesn’t work for them. If you have got a company that is going to double in size in three years, it can’t lock itself into a five-year lease. We focus on understanding what the company is about and adapting to its requirements.”
The tenants are being offered a mix of office and laboratory space, of which there is a critical shortage of the latter in the Thames Valley. When the Gateway Building opens next August, it will be the UK’s first new science park since Bristol & Bath Science Park opened in 2011.
There are no specific plans to build speculatively, even though the park is built on former farmland owned by the university and financed from its resources, but if it were fully built out it could grow to 800,000 sq ft. Gillham, who declines to name the medical therapy company that is now agreeing heads of terms for the entire second building, believes that at this stage of development the main aim is to create critical mass.
Although in recent years the Thames Valley may not have provided much in the way of lab space, it has certainly provided the pharmaceutical sector with office stock.
Research carried out by Savills reveals that while office lettings to pharmaceutical companies accounted for only 9.5% of take-up in the Thames Valley between 2011 and 2015, so far this year it has accounted for 25%. That figure may seem a great leap, but it disguises the fact that when Bayer, the German pharmaceutical company, leased 80,000 sq ft at Green Park in Reading, it was relocating within the Thames Valley from Newbury.
There have been genuine newcomers, though. Alnylam Pharmaceuticals took 35,000 sq ft at Braywick Gate, Maidenhead, having outgrown serviced offices in Uxbridge, and the Japanese company Otsuka Pharmaceutical has leased 7,453 sq ft in Wexham Springs, Slough.
Savills, which is the University of Reading’s agent, predicts that the Thames Valley Science Park could create a pharma tech cluster. One of the benefits, as the report points out, is that the pharma companies can use the many technology firms in the region to speed up the analytical process of clinical drug trials.
“It is all about collaboration, and that’s what makes it different from a conventional business park,” says Jon Gardiner, Savills’ head of national office agency. “The rationale is to be next to the right people. People are here because they want to be part of a collaborative environment.”
Anyone wanting research facilities in the South East must turn to either Cambridge or London at the moment, he adds, and London is an expensive place to live for a poorly paid academic.
The University of Reading has not sought B1b research and development planning consent, but Gardiner believes that the restriction will be imposed by the university itself, which is likely to insist on research and development in the science park. Other occupiers, he says, could be quangos or businesses that support innovation.
Gardiner estimates that the all-inclusive rent could be in the mid-£30s/sq ft and, although the university has no intention to sell, if a 6% yield is assumed, the fully developed park could be valued at £400m.
The news that the university wants to maintain the purity of the science park will come as good news to the developers of Reading town centre.
Next year will see the completion of four speculatively developed offices near Reading station that will add more than 500,000 sq ft to the town’s supply of grade-A offices.
M&G Real Estate is the developer of both 2 Forbury Place, a 186,000 sq ft building backing on to the railway lines that will complete in the autumn, and R+, a 104,000 sq ft scheme in Blagrave Street where work has just completed. Boultbee Brooks is offering The White Building, a major refurbishment of 93,000 sq ft; and Landid and Brockton Capital will have Thames Tower, a refurbishment that offers 180,000 sq ft immediately opposite Reading station, ready for occupation by February.
What all three developers have in common is that they hope to achieve record-breaking rents. M&G is hoping for £39.50/sq ft on R+. If that were achieved, it would eclipse the £34/sq ft that law firm Gateley paid in May for the 7,000 sq ft top floor of The Blade in Abbey Street.
All of the landlords are also courting EY, the accountancy firm, whose lease at Apex Plaza in Forbury Road is coming to an end. It may take up to 60,000 sq ft in one of the four new buildings.
Chris Hiatt, a director of Landid, refuses to comment specifically about EY, but says it is “having some conversations that are ongoing”.
Brockton and Landid have also added four floors to the 40-year-old Thames Tower skyscraper. It is not quoting a rent, but it is expected to be in the mid-£30s/sq ft.
Virgin Media may be interested in leaving Bartley Wood Business Park in Hook, Hampshire, and coming to one of the new Reading offices where it could take up to 80,000 sq ft. But that will still leave a lot of new empty office space, something that was brought into focus when Stanhope and Benson Elliot mothballed their Station Hill development.
If the mixed-use development had gone ahead, it would have doubled the speculative space, although its agent, Savills’ Gardiner, says the residential part would have started first.
Developers can take heart from the fact that office take-up in Reading is strong at the moment. Duncan Campbell, a director of Reading property consultancy Campbell Gordon, says greater Reading take-up so far this year is 324,000 sq ft, which is well above the 10-year average of 319,000 sq ft. “We are on track to have a good year,” he says.
Campbell points out that the last six deals have each been for 7,000 sq ft, but one of the larger lettings illustrates the medical community’s desire to be in the Thames Valley. Becton Dickinson, a US medical technology company, leased 45,000 sq ft at 10.30, offices on Winnersh Triangle that owners Patrizia and Oaktree have just refurbished.
Such deals must give the University of Reading hope that the Thames Valley Science Park has a distinguished future.
14 July 2016
18 January 2016
8 May 2015