Life science sector remains strong in the South East despite ongoing uncertainty

27 June 2017

According to Savills, the pharmaceutical industry and life sciences sector continues to be a key driver of demand within the M25 office market accounting for 10% of all space transacted in the region in 2016, the highest proportion of take-up in the last five years. This suggests continued confidence by both domestic and international firms in the South East, despite ongoing economic uncertainty surrounding Brexit.

Focusing solely on the Thames Valley, the pharmaceutical sector accounted for as much as 30% of take-up in 2016, the highest proportion on record since 2000, whilst also boasting the highest concentration of life science employees and companies in the UK.

The strong take-up witnessed last year has continued into 2017, with 64,162 sq ft (5,960 sq m) acquired by the pharmaceutical sector in Q1, accounting for as much as 9% of space transacted in the South East. Savills notes that the average pharmaceutical deal size since 2010 is 23,539 sq ft which is 47% larger than the market average of 15,950 sq ft (1,481 sq m), illustrating the scale of the pharmaceutical companies active in the region.

Notable life sciences and pharmaceutical transactions that took place in the South East in 2016 include Bayer taking 80,000 sq ft (7,432 sq m) at Green Park in Reading, Smith & Nephew leasing 60,000 sq ft (5,574 sq m) at Croxley Green Business Park in Watford and Becton Dickinson acquiring 44,557 sq ft (4,139 sq m) at Winnersh Triangle in Reading. Furthermore, deals to K2M at Stockley Park, Pierre Fabre in Reading and Mallinckrodt Pharmaceuticals in Staines all achieved record rents in their respective markets at the time of signing, proving that these types of occupiers are willing to pay more to secure the right premises in the best location in order to attract the highly skilled labour they need. What’s more, 60% of deals last year completed post EU referendum, 13 of which were international firms cementing their presence within the UK.

The sector’s appeal has not been restricted to domestic occupiers, instead Savills found that UK pharmaceutical businesses only accounted for 28% of transactions in the South East over the past five years. Savills research shows that the US has been the most active occupier accounting for 685,563 sq ft (63,690 sq m) of take-up, equating to a 41% market share in the same time period. Notable US deals in the South East since 2011 include Gilead Science, Abbott Laboratories, Covance and Becton Dickinson.

Simon Preece, associate in Commercial Research at Savills, comments: “The pharmaceutical sector in the South East received £519.7 million of investment last year, following on from £1.48 billion in 2015, proving that there is still strong demand from investors. The extra capital invested bodes well for future job creation, which in turn will inevitably lead to further real estate transactions. Furthermore, with the demographic of the UK shifting towards an ageing population, this is likely to continue to drive research into drug development and life sciences products.”

Going forward, Savills predicts a greater emphasis on pharma-tech clusters as collaboration between pharmaceutical companies and big data analytic providers become crucial to improving efficiencies. Examples include data companies such as Tessella and SAS working with the likes of AstraZeneca and GSK. This trend is already starting to materialise at Thames Valley Science Park in Reading where there is already a clustering of smaller pharma and tech companies which is set to expand further as approximately 650,000 sq ft (74,322 sq m) is still to be developed at the park.

Jon Gardiner, head of national offices at Savills, adds: “The UK’s decision to leave the EU has resulted in uncertainty surrounding future R&D funding, and whilst funding clearly remains paramount, these type of occupiers also need access to highly skilled workers from the Life Sciences and knowledge economy, and the Thames Valley is exceptionally well placed to deliver in this respect.”

 
 

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Key Contacts

Jonathan Gardiner

Jonathan Gardiner

Head of
National Office Agency

Savills Margaret Street

+44 (0) 20 7409 8828

 

Simon Preece

Simon Preece

Associate
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8768