The outlook for the life sciences sector is robust heading into the final months of 2024, according to Knight Frank, thanks to growing venture capital investment.
By the end of September this year, the number of active UK life sciences companies reached 8,092 – an increase of 156 from the previous year. Venture capital funding raised by those companies in Q3 2024 hit £872.2m and totalled more than £2.3bn in the year to the end of Q3.
Although the figures are both behind last year’s £883m and £2.7bn, respectively, the volumes are 34% ahead of Q2 2024.
Jennifer Townsend, partner for life sciences research at Knight Frank, said: “Excluding the pandemic peak, widely seen as an outlier, these gains are even more impressive, making it the best year-to-date performance on record.”
However, this is not expected to immediately translate into demand for science-related real estate, according to Nicholas Blevins, head of life sciences and innovation for occupational, leasing and development at Knight Frank. He told EG: “We are hitting an equilibrium as investors understand what valuations are for the businesses that they have been investing in. We’ve got to see three or four sustained courses of similar levels of investment before we will start seeing a significant uptick in demand.
“Occupiers are still very cautious about putting that capital into real estate. Even though they have the money now, they don’t know what they are going to get from the next round of funding.”
Knight Frank said venture capital fundraising was mainly driven by bigger investments poured into more established businesses, some of which already have substantial real estate.
Life sciences leasing across the Golden Triangle reached 82,853 sq ft in Q3 2024, down from 124,148 sq ft recorded in the prior quarter and below 240,000 sq ft in Q3 2023.
Blevins said: “Until we see a significant return of occupier demand, I think investor demand is going to remain relatively suppressed, other than those that are already invested.”
Investment in the Golden Triangle market in Q3 2024 totalled £125m across one deal. Abcam, a part of Danaher, has bought out its 105,000 sq ft headquarters at Cambridge Biomedical Campus from Tesco Pension Fund. The transaction reflects net initial yield of 4.6%.
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