BioMed Realty’s Colleen O’Connor, Babraham Research Campus’ Derek Jones, and JLL’s Chris Walters join Montfort’s Andrew Teacher to discuss the outlook for life sciences, the challenges of creating high-spec lab space, and why the success of the industry should be cause for optimism in the UK.
Colleen O’Connor is senior vice president of leasing for the US East Coast and UK markets at BioMed Realty, a Blackstone portfolio company. BioMed Realty, a leading provider of real estate solutions to the life science and technology industries, recently announced that it had completed the lease-up of a 34,000 square feet laboratory building at the Babraham Research Campus – headed up by Derek Jones - which is being delivered as part of a joint venture with Babraham Research Campus Ltd – which is responsible for the development and management of the Campus on behalf of its stakeholders. The pair’s career paths to date look very different. O’Connor came to life sciences from a background in finance. She joined BioMed Realty, where she’s worked for a decade, following roles at PwC and Boston-based Fidelity Investments.
“I was really excited about the tangible nature of real estate investments and BioMed Realty having a platform supporting the life sciences industry was very exciting to me,” she describes.
Jones, on the other hand, started out doing exactly the sort of ground-breaking, early-stage science that the Babraham Research Campus now enables others to do. After working as a medicinal chemist at NASDAQ-listed Merck, he moved into business and corporate development at Chiroscience, where he was part of the team that licensed the UK’s first biotech product. Jones then co-founded and sold a series of life sciences firms before joining Babraham in 2008.
He explains the work of the Babraham Institute, a publicly funded research institution that sits at the heart of the Babraham Research Campus: “It’s strategically funded by the UK taxpayer through UK Research and Innovation and the Biotechnology and Biological Sciences Research Council. It looks at healthy ageing – how can we live long lives, but healthy lives – and that’s about understanding the biology of ageing.” Such a task is no small feat – out of over 10,000 known diseases, scientists have only found cures for only about five percent, according to The Lancet.
The Campus is now home to some 2,000 professionals. “We are here to create a community of entrepreneurs and scientists to work together to help develop the drugs of the future and build the businesses for the future,” Jones says.
The wide variety of firms that work in the Campus is key to its vibrancy. “Innovation happens in proximity, not in isolation,” as O’Connor points out. Among the tenants who have recently signed up for space at the new building that is being delivered by the joint venture and is due for completion in early 2024, are Insmed Incorporated, a global biopharma company, XAP Therapeutics, an emerging biotech company, and Mosaic Therapeutics, an oncology therapeutics company that recently raised $28 million in a Series A funding round (the start-up is an alumnus of the 2021/22 cycle of Accelerate@Babraham of which BioMed Realty are one of the strategic partners, based at Babraham Research Campus).
Jones agrees: “The campus vibe is really important for us. Some of the structural shifts that we’ve seen in the wider pharmaceutical and life sciences sectors over the last 20 years have pushed a lot more R&D downstream to the startup community.”
Chris Walters is head of the life sciences team at real estate giant JLL. He’s particularly bullish about the continued strong performance of life sciences real estate. “It’s still proving to be a very robust occupational market from a demand perspective, particularly in the established clusters like Cambridge,” he observes. “We’re tracking about a million square feet of active lab demand for space in the Cambridge market, which is very positive.”
Still, recent macroeconomic headwinds have seen some consolidation in the sector. “There is a much smaller group of investor developers that are looking to deploy capital into the UK life sciences market,” he explains. “There are opportunities across the UK but the focus is pretty much solely on Cambridge, Oxford and London,” a region where UK life sciences has a critical mass and is responsible for seven percent of the UK’s economic output.
Having the right real estate, the trio agree, is crucial for both individual companies and the sector at large to grow.
“The tenant doesn’t want to focus on real estate,” O’Connor says. “They want to focus on the cutting-edge research and life-saving therapies. Our core business model focuses on the real estate all day, every day.”
To this end, BioMed Realty has a fully integrated team that brings operations, facilities, leasing and development all in-house.
With areas like Cambridge still seeing a stark supply-demand imbalance, many have sought to convert languishing commercial space into functional labs. However, this is more difficult than it sounds, as O’Connor states has been the case in the US: “As we looked at what areas were actually zoned for life science, which buildings had enough vacancy to accommodate a footprint that made enough sense to allocate a lab investment in, and which buildings actually had the right amount of infrastructure where you could deliver a facility that was of a high enough quality to really meet our investment criteria, the list was actually incredibly short.”
“There are absolutely some office projects being converted to lab that have no business being a lab facility,” she continues.
Walters concurs: “We’ve seen the same thing unfold here in the UK, particularly in the core markets. When you actually look at the 10 or 15 criteria that you need to have in order to deliver a successful wet lab building, they’re pretty stringent, making it challenging for developers to deliver the right product.”
Cambridge’s success as a life science hub has been noticed at the highest levels of government, particularly with the announcement earlier in the year of ‘Cambridge 2040’, a strategy intended to deliver 250,000 homes over the next two decades.
Alongside the Mansion House announcement, which sought to make it easier to get institutional funds to commit capital directly into growth companies, particularly around science, technology and innovation, Walters is optimistic.
“When you look at those two together, there’s some big opportunities for the UK from a science perspective,” he says.
Indeed, Jones thinks that many in the country have a habit of being too negative.
“I’m always very conscious that the UK wears a hair shirt about how rubbish we are at stuff,” he argues.
“There is one area we are top hat at, and this is life sciences, creating new drugs, finding new opportunities. We could always do better. But don’t for a moment think we’re not very good at it. We’re bloody good at it.”