Oxford Properties Deal Could Take Life Sciences Investment Mainstream
Until now, many of the big life sciences real estate investment deals in the UK have involved private equity firms, international and domestic: Brookfield, Brockton, Harrison Street and Blackstone’s BioMed Realty have all made significant investments.
But a deal completed last week highlights how institutional investors are now willing to back the nascent real estate sector, with a bellwether investor having taken the plunge in the first deal in what could amount to a £1.2B investment in the sector.
Oxford Properties has bought a 59K SF office leased to AstraZeneca in Cambridge for £45M. The news was first revealed by CoStar.
Oxford is not the first pension fund or institution to invest in UK life sciences: L&G formed a joint venture to invest in the sector with Bruntwood, and AXA has backed developer and operator Kadans.
But Oxford has built something of a reputation over recent years: While it is not at the front of the vanguard when it comes to emerging real estate sectors, it is usually one of the first institutions willing to tread new ground, and where it goes, others follow.
It was one of the first global pension funds to enter the London office development market with the forward funding of Watermark Place in 2006. It was an early mover in the UK build-to-rent market when it backed the expansion of Delancey’s Get Living platform and was one of the first institutions funding speculative logistics development when it backed a fund managed by Gazeley. All of those sectors are regularly frequented by UK and international institutional investors.
The company has been a major investor in U.S. life sciences in the past three years, and it has said it could put up to £1.2B into the sector in Europe, principally the UK, with Oxford, Cambridge and Greater London top of the agenda.
“Since our first life sciences investment in 2017 this sector has been one of Oxford’s key global conviction calls,” Oxford Executive Vice President, Europe and Asia-Pacific Jo McNamara said in a statement.
She said structural tailwinds like demographic changes and an accelerated pace of technological and scientific advances are supporting the life sciences sector. Private and government funding has increased significantly in recent years, driving continued research and development in biotech, pharmaceuticals, nutrition and medical devices.
“As this capital is deployed, occupier requirements increase, leading to little to no space available in key global hubs such as the Cambridge Science Park or Kendall Square in Boston, which provide tenants with highly desirable networking and talent pooling ecosystems,” McNamara said. “As we have grown our platform in North America over the past few years, we have seen the sector evolve and mature and we're now beginning to see the same pattern emerging in Europe. We intend to use the learnings and expertise we have built up in the US to fulfil our ambition to replicate that success in Europe.”
The building bought by Oxford is 310 Cambridge Science Park, which is let to AstraZeneca until 2023. At that point AstraZeneca will move into a new £500M UK HQ it is building nearby, indicating that Oxford is banking on leasing the space at a higher rent. It bought the building from the Local Authorities’ Property Fund, and the price paid indicates a yield of 3.6%, CoStar said. New entrants to the sector that also bid included British Land and Aberdeen Standard Life.
