With a new Budget on the horizon, the government is focusing on delivering its target of increasing investment in R&D to 2.4% of GDP by 2027. Life sciences will be critical, but the industry is changing rapidly and so too is its need for space.
Life sciences support almost a quarter of a million UK jobs and generate a turnover of £74bn. By 2025, the industry has the potential to add £8.5bn to the economy and deliver at least 30,000 additional jobs.
But we must rethink our understanding of the sector to support its growth trajectory through the 2020s. If we do not, we risk misrepresenting the true size of the market and the drivers of future occupational demand.
The life sciences sector is made up of three core strands: bio-pharmaceuticals; medical technology; and service and supply. These are each connected to an ecosystem of collaborators.
We tend to think of life sciences occupiers as the UK’s 700 biopharma businesses such as Pfizer, Novartis, GSK, Merck and Bayer, which in total employ around 63,000 people in the UK and require large-scale laboratories alongside corporate offices.
Medtech, however, is the fastest-growing subsector and already the largest part of the UK life sciences industry, with around 97,600 employees and more than 2,700 businesses.
Next-wave technologies and an explosion in healthcare data are driving rapid transformation. No longer solely manufacturing devices and diagnostics, medtech is moving towards advanced technology and AI. Biopharma companies are also increasingly partnering with or acquiring medtech firms.
So what does this mean for real estate?
The first major trend is the science and technology cluster. As the tech, medtech and biopharma sectors become increasingly interdependent, they need to be located close together in spaces that aid collaboration and innovation.
Bruntwood and Legal & General Capital are creating a network of innovation districts across the UK that accommodates the needs of both science and technology occupiers and drives collaboration between them. Businesses are gravitating towards these clusters.
Second, medtech disrupters are injecting fresh occupational demand for highly connected workplaces in UK cities with a deep talent pool in both life sciences and technology. Fast-growth SMEs will increasingly need flexible and affordable spaces to grow into, and one of the most compelling requirements for investment is for flexible offices and co-working spaces.
Finally, large technology companies pushing deeper into medtech will drive occupational demand. Last year, Google reorganised its health businesses into Google Health, and was the largest medtech investor, completing almost 100 financing deals, including the $2.1bn acquisition of Fitbit.
The medtech boom is just beginning. Understanding this dynamic sector and delivering the right real estate solution at each growth stage will be critical to fully capturing this opportunity. Demand will be greatest for highly connected, flexible spaces in science and technology clusters that maximise collaboration.
Jennifer Townsend is research associate at Knight Frank