News release

The impact of US biotech stock slowdown on life sciences real estate in the UK

The UK is seeing a slowdown in the volume of venture capital flowing into life science companies

August 02, 2022

The UK is seeing a slowdown in the volume of venture capital (VC) flowing into life science companies – mirroring the similar market correction being experienced in the US – resulting in potential exit strategy revisions. The impact on occupational demand at this stage is evolving but the immediate demand and supply imbalance suggests the importance of planning early for growth will be important for life science occupiers.

Venture capital barometer  

 US is experiencing a slowing in the market as tourist investors – who flooded the market during the pandemic in search of robust returns and supported by public sector funding – are now turning their attention elsewhere.

This has resulted in many life science biopharmaceutical companies that IPO’d during the pandemic falling in value, driving the decline in the Nasdaq Biotechnology Index in 2022.

As with many other countries globally, 2021 was a record year in the UK, with companies raising £5.2 bn; substantially more than the £2.8bn raised in 2020. However, VC totals were just £2.14 bn in the year to date (01/08/2022), compared to £3.29 bn in the same period for 2021 (PitchBook Data).

Nevertheless, it is important to note that although there has been a reduction in the volume of VC flowing into the market, 2022 levels are still higher than 2020 totals at £1.37 bn, and four times as high as VC raised in the same period in 2015 (£767 m).

Similarly, although VC levels have slowed, public funding to life science in the UK is on the rise with the implementation of the Life Science Vision in 2021, and multiple announcements of an increase to funding R&D equating to £22 bn pa by 2027.

This is being matched by big pharma having available dry powder to invest into the sector, presenting different opportunities for growth in the life science market.

Chris Walters, Head of UK Life Sciences, JLL, said: “What this means from a business perspective is a change in exit strategies for life science companies. VC is still flowing into companies but their business plans may change from an IPO route to that of being acquired, merged or, the new trend that we are seeing more of, to form strategic partnerships with larger entities. This will have implications on real estate activities as businesses seek to make best use of the physical space they currently occupy whilst having a more considered approach to their future growth.  

Impact on real estate

Within the real estate sector, the demand for specialised space alongside pent up capital raised during the pandemic should still ensure sustained interest in prime markets, particularly where supply is constrained elsewhere.

JLL is currently tracking 3.2 m sq ft of active wet-lab demand for the Golden Triangle, up 400,000 sq ft on nine months ago. With limited purpose-built lab space being delivered in 2022, the short-term development pipeline is stark with 1.1 m sq ft (NIA) of lab space being delivered in the next 18 months. Those occupiers with an immediate need for more space have limited opportunities in the market and the need to think earlier about any growth plans is therefore pressing. The changing exit strategy for these businesses may have an impact on that short term need but delivery of specialist lab space, like any other asset class in real estate, takes time.

In the medium term, between now and end of 2025, this development pipeline could increase to 4.5 m sq ft of lab space (NIA), with an additional 9.6 m sq ft earmarked for 2026 to end 2030. This increase in additional space coming to market has changed substantially over the past 6 months, with JLL tracking a total of 11.5 m sq ft at that time, compared to 14.1 m sq ft today. However, a high proportion of this space is pre-planning, and therefore is not committed space coming to market, rather only an indication of the increase in capital allocation from real estate developers and investors.

Paddy Shipp, Director - Head of UK Life Sciences Agency, JLL, said: “With a strong development pipeline in the medium to long term landlords will have heightened pressure placed on them to understand occupiers’ propositions and business needs. We are seeing an increasing number of occupiers in the industry focusing on the importance of a successful and collaborative ecosystem as well as top quality real estate in which to operate.

“Furthermore, occupiers are increasingly seeking buildings that encompass genuine and deliverable sustainability credentials, high-quality specification, technology enablement, and a strong amenity and wellbeing provision. It is these buildings in the highest quality locations that will outperform the competition.”


About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 100,000 as of March 31, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.