As VC Targets Life Sciences, Can Golden Triangle Shine Again?

The two-year slowdown of venture capital investment in UK life sciences companies took some of the heat out of a booming real estate sector. 

But as investors start to look at 2025 and beyond, the return of VC looks set to boost the life sciences real estate market across the Golden Triangle of Cambridge, Oxford and London.

A report from adviser DTRE showed that more than £1B has been raised so far this year by life sciences and biotech firms headquartered in London, up 48% on the five-year average of £694M. More broadly, the UK Bioindustry Association estimates that VC investment in the sector has reached nearly £1.4B, already ahead of the totals for 2022 and 2023.

The UK life sciences real estate market is regaining some of the vigour it had before interest rates spiked in autumn 2022, slowing tenants' expansions and cooling investor interest. 

But the sector is also changing, and the next generation of companies taking space in the Golden Triangle may not be the same as those that rode the first wave.

“Life sciences has been under the microscope, and what we’re seeing now is a calmer market,” Savills Offices and Life Sciences Commercial Research Director Steve Lang said. “But all the major real estate developers are active, and they understand the nature of the cycles and the longer-term scenario.

“Life sciences has broadened out so much, and I think digital health is probably a more accurate reflection of development going forwards.”

Savills estimates life sciences-related takeup this year at around 500K SF in Cambridge, a little below the 600K SF recent average. But Lang said Savills knows of around 800K SF of requirements. Similarly, Lang said he expects Oxford takeup to reach about 500K SF by year-end, down from about 600K SF in 2023. But he added demand is trickling for both markets.

“Lab uptake and the venture capital picture are very closely aligned, and financing had softened on the biotech side. However, although we are not going back to the levels of 2021, funding does appear to have grown steadily again, at what is probably a more sustainable level,” Bidwells Research Director Sue Foxley said. “Inevitably, there will be a slight lag between funding and real estate demand.”

In Cambridge, the three largest Q3 deals were Immaterial's almost 13K SF at Accelerator Park, RNAvate's 12K SF at the Meditrina Building, and Biocrucible completing the 9K SF assignment of AbCellera’s lease at the Emmanuel Building at Chesterford.

DTRE said that the increase in overall demand has been driven by larger requirements entering the market in Q3, reflecting Cambridge’s growing appeal to larger occupiers. Cambridge has maintained the lowest vacancy rate among the Golden Triangle cities.

“Cambridge demand is dominated by university spinoffs, and they tend to remain in the city and evolve their requirements. Funding has been driven by U.S. companies, but more UK capital is also entering the market,” Foxley said.

Among ongoing developments, Mission Street and BGO received planning consent in September to deliver a 23-acre urban science district in central Cambridge. The partnership has a development pipeline of more than 1.5M SF of lab and office space, including in Cambridge, Oxford and Bristol.

Meanwhile, Pioneer Group is working on the redevelopment of the former Grafton Centre mall in Cambridge, which is being converted into around 500K SF of office and lab space but will also retain about 125K SF of retail and leisure units.

“With stabilisation, I think we’ll see more venture capital coming into the market, especially for startups, driving the smaller space demand,” Pioneer Group Director Subjit Jassy said.

“Post-Covid, there was a huge focus on the medical side of life sciences, but we’re seeing a blurring of the lines between science, technology and engineering,” he added. “For example, AI innovation is becoming part of the wider life sciences picture. In this field, the collaborations between companies at a lab site can be really important, and it’s something we specialise in encouraging and facilitating.”

In London, DTRE said that lab takeup totalled almost 19K SF for the first nine months, with three deals completed during Q3. Laverock secured 3K SF at LBIC Tribeca, Baseimmune also took 3,350 SF there, and Myricx Bio acquired 2K SF at 20 Water Street. An additional almost 91K SF of laboratory space was under offer by the end of September, and if these deals are completed before year-end, London will exceed its five-year average takeup of 100K SF by 10%, DTRE said.

This quarter also saw Eli Lilly’s requirement resurfacing and focusing on Kings Cross, although its space needs have reduced from 75K SF to 30K SF.

This year, 103K SF of laboratory space has transacted in Oxford, with a further 89,600 SF under offer. If all deals under offer are completed by year-end, Oxford is projected to surpass its five-year average takeup by 3%, DTRE said.

Significant deals include Nucleome taking 17K SF of fully fitted lab space at Inventa and Yellowstone completing 8,100 SF at Building 4100 at ARC Oxford. Life Science REIT also completed a new lease in October with Infleqtion for 7,500 SF of fully fitted space at the Innovation Quarter at Oxford Technology Park.

Earlier this year, The Crown Estate announced a partnership with Oxford Science Enterprises and Pioneer Group for their first lab development in Oxford, following The Crown Estate’s acquisition of the long leasehold of the former Debenhams site in the city centre from DTZ Investors. Subject to planning, construction will begin next year, with the lab space due to be fully operational by 2027-2028, on a £125M investment to create circa 100K SF of life sciences space.

“We’ve gone from a boom to a softening, and at the moment, takeup in the market in the Golden Triangle is very much constrained by a lack of stock,” Savills' Lang said. “Occupiers tend to like prefitted built space because once they receive funding, they want to press the green button and occupy immediately.

“The fact that the sector is more mature also means the funders and the real estate industry have more experience, and locations like Cambridge, Oxford and London are all likely to be winners because of the talent available and their proximity to their customers. We’re also seeing average deal sizes increasing, suggesting Big Pharma companies are taking bigger bets to deliver on their drugs pipelines.”