A few short days before she moved into No. 10 last summer, Theresa May set out her vision for the Britain she hoped to lead. The UK, she said, needed a “proper industrial strategy” to stimulate jobs and growth and - in the subtext - keep big business here in the post-EU future.
Three months later, details were emerging. Speaking at the CBI’s annual conference in November, May said that the UK should and would become the “global go-to place for scientists, innovators and tech investors”. Science and research would be supported, she pledged, and new sites, facilities and enterprise zones encouraged.
In real estate circles, the potential that lies in science has long been known, but it wasn’t until recently that investors and developers began to take action and embark on science park projects on a national scale.
Now, from East Anglia to County Durham to the North West, a wave of developments aimed at stimulating the sector is well under way, made more urgent by the impending prospect of Brexit.
So what is driving the new generation of science parks, and why is the private sector showing an interest once again?
As the country that produced Robert Stephenson and his rocket, Isaac Newton and his apple, the discovery of penicillin, the mapping of DNA and the creation of the World Wide Web, Britain’s scientific reputation precedes it. It’s no wonder that scientists want to be here, and often in close proximity to the great universities, which continue to attract the bright young scientific minds of the future and the companies hoping to recruit them.
All of this is good news for British universities, and for the property industry. Throughout the country, high demand for dedicated science space has sparked a renaissance in the sector both commercially and as a viable and resilient real estate asset class.
As Kaleigh Haeg, head of life sciences at Colliers International, says: “The UK has a rich history of being one of the best locations for science research within the global life sciences community.
“Also, the science industry has established itself as a profitable market that continues to grow, attracting long-term investors whose focus is on access to the science and less on concern about the short-term uncertainty.”
Science has established itself as a profitable market that continues to grow - Kaleigh Haeg, Colliers
This was true before the EU referendum last summer, but the vote to leave has been a major catalyst for renewed growth. In the Autumn Statement that followed, chancellor Philip Hammond announced a further £2bn of funding to boost scientific research and development (R&D). And, in a green paper outlining the new government’s post-Brexit industrial strategy, “investing in science, research and innovation” was number one on the government’s ‘10 pillars’ of industrial policy list.
Politically, science and research is back on the agenda, but you don’t need to have a long memory to know that the real estate industry has been here before. Indeed, Carl Potter, national head of offices at Bilfinger GVA, says that demand for science facilities is always there - what’s changed with the economic cycles is how much interest the private sector has shown.
“In the mid-noughties property asset bubble, the drive for increased yields led to an increase in private sector ownership and a small number of funds and propcos built up portfolio ownerships to take advantage of the higher yields that science parks offer as a consequence of their risk profile,” he elaborates.
“As the current commercial market has again pushed towards a low return model and the occupational demand for the type of property and occupational solutions offered by science parks has proven to be consistently strong, there is again a growing interest in the science park market from the private sector.”
One of the North East’s largest hubs for science and innovation is expanding with the addition of two new buildings as part of the NETPark Explorer project. Work got under way earlier this year and is due for completion in 2018.
In March, plans for a new £21.9m enterprise and science park were unveiled by the Marches Local Enterprise Partnership. It will sit just outside Newport in Shropshire. Work is due to begin next year on the project, which is hoped to attract 950 skilled jobs to the area.
This May, a 70,000 sq ft building will open at Manchester Science Park, delivering what developer Manchester Science Partnerships hopes will be another ‘jewel in the city’s crown’ and further cement its standing as a hub for science in the north.
Cheshire is determined to take its place within the ‘northern powerhouse’ and, to that end, TEM Property Group plans to deliver 2m sq ft of science and advanced manufacturing space on the outskirts of Chester, tying in with the ‘Cheshire Science Corridor’.
The East Midlands could become a new magnet for science and medical facilities if ambitious plans in Derby and Nottingham come to fruition. In Nottingham, several projects are under way to transform space around the Boots headquarters, University of Nottingham and Queen’s Medical Centre sites. And in Derby a 9.6-acre site has been earmarked for a major new science park next to the Rolls-Royce HQ.
Originally given the go-ahead in 2009, plans for a science facility in Lancaster have repeatedly stalled. Things now look to be heading in the right direction, though, and if all goes to plan, the Bailrigg Business Park, close to Lancaster University, should be the site of a new science park.
And well there might be: science is big business, and it’s growing. Figures from Savills reveal that in the South East alone, pharmaceutical companies acquired 372,819 sq ft of office space in 2016, including three record-breaking deals signed after the EU referendum. The key, Savills’ report stated, is that new space needs to become available to meet demand from within the UK and overseas.
So what could be the next big opportunities for investors now that science is back in demand?
Perhaps inevitably, the universities of Oxford and Cambridge have always had the most magnetic effects on businesses and investors.
Demand is huge and shortage is high, so we see a larger development pipeline - Philip Woolner, Cheffins
Indeed, Philip Woolner, joint managing partner at agency Cheffins, says that lack of supply is a big issue at Cambridge’s science parks. “Demand is huge and shortage is high and this is why we are seeing a larger development pipeline for the science parks than ever before,” he says.
Cambridge’s historic rival isn’t struggling for demand either. The Oxford Science Park, which opened in 1991, is itself going through a major extension led by Magdalen College with ground being broken on the new £13m office and laboratory Schrödinger Building, due for completion next spring.
When it comes to development, however, it is outside the South East that the most activity is happening. Take Cheshire, for example, where TEM Property Group is working on ambitious plans for a new science park - the Cheshire Gateway, within the ‘Cheshire Science Corridor’ - and where an extension has recently been completed at Sci-Tech Daresbury, near Warrington.
A little further north, after several false starts, Lancaster University is seeking tenders for a new health innovation science park to be built adjacent to the main campus; this May, the new Bright Building will open at the Manchester Science Park; in February work got under way on the NETPark in Sedgefield, County Durham; and in Harrogate, plans for a ‘green-tech’ facility, Flaxby Covert, are moving forward.
As far as asset classes go, at least on the surface, there might seem safer bets. Compared with the relative simplicity of mainstream office space, science facilities, with their uniquely high-tech requirements, heightened safety and complex logistics needs, take a lot more work and thought.
“The life science industry is a niche sector,” says Haeg. “It’s essential for both asset management and developers to have an understanding of the market demand or work with a market expert that specialises in this particular type of property.”
Will Heigham, partner and head of the science and technology Group at Bidwells, says this niche within asset management has its own set of rules.
He explains: “You define the success of a science park by a number of key factors, including whether it is home to the world’s leading science-based companies, a high proportion of tenants undertaking world-leading R&D rather than manufacturing, the split between home and foreign companies, split between start-ups and established and how well companies collaborate and do business with each other.”
It is a complex challenge, but James Latham, associate in the commercial team at Carter Jonas, says that, drawing on the firm’s experience at the Oxford Science Park, there are great prizes to be had.
“Oxford has created a huge reputation for itself and there are businesses that want to carry on that work and be there in the action,” he says. “The key is to create a place of good employee wellbeing with fantastic amenities. All of a sudden, you can create this great cluster between office and lab occupiers all working together.”
Regardless of the challenges in bringing such sites to market, it appears that science parks are firmly back on the asset class agenda and the signs are that they will stay there for some time to come.
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