Weekend Interview: Kadans' James Sheppard And The Science Of Life

This series goes deep with some of the most compelling figures in commercial real estate: the deal-makers, the game-changers, the city-shapers and the larger-than-life personalities who keep CRE interesting.

James Sheppard is one of the big wheels of UK life sciences real estate. But, as he is the first to admit, he's not really a property person at all. A graduate in pharmacology and molecular genetics, Sheppard is guiding the UK growth of Kadans Science Partner, where he is managing director for the UK and Ireland.

Having worked on some of Europe’s largest and most advanced centres for life sciences innovation, such as The Francis Crick Institute and Imperial College’s White City Campus, his background is far removed from the usual property curriculum. 

Having started with pipettes, Sheppard is now working with the sometimes harder materials of bricks and mortar, yields and internal rates of return.

Fresh from the launch of Sycamore House, Kadans' latest 86K SF lab campus in the heart of the UK's Science Golden Triangle, and with recent announcements about a 22-storey lab tower at London's Canary Wharf and a £200M Manchester campus, Sheppard is bringing to life the property side of science. A 2.5M SF laboratory portfolio is under construction, with a further 500K SF of lab floorspace anticipated within the next three years.

Bisnow: You trained as a scientist, not a property professional, so what led you to commercial real estate?

Sheppard: I'm not a real estate person by training. I've no property qualifications. I studied pharmacology and molecular genetics, and worked at the Francis Crick Institute, Imperial College London and in Oxford, so mine is an operational background. I've learned about real estate, rents and yields since. I had a period at Cushman & Wakefield as head of life sciences, and that really helped. They put a lot of time and effort into my education.

Bisnow: Why science in the first place? What drew you in?

Sheppard: I wanted to be a medical doctor to start with, but I did work experience with a hospital consultant and realised I hated it. But I enjoyed the science, the principles and methodology, so I studied life science, then realised I didn't have the patience for working all day with pipettes and doing the repetitive work it involved.

I still wanted to keep in touch with science, but by sitting alongside it, so began to learn around the commercial aspects of it, and what really flipped me was working on the Imperial College Incubator, the first new wet lab innovation centre in London for a decade. It baffled me why there wasn't more of this — we have brilliant universities in the UK, but when somebody wants to turn an idea into a business, they get on a plane to the U.S. and never come back. The answer to that is, in part, a real estate issue.

Bisnow: Was there a moment when it became clear what your direction would be?

Sheppard: I can pinpoint a single lecture by professor Clive Page, [director of the Sackler Institute of Pulmonary Pharmacology at King's College London]. He was an expert in respiratory disease, and he came to lecture us at first in a very dry, very academic way, but it turned into a story of discovering a molecule and how you could create a business around it, then moved on to the partnerships he'd pulled together, and listening that day, a dry topic suddenly brought to life the commercial reality.

Bisnow: So life has been a process of gradually realising you didn't want what you thought you wanted.

Sheppard: Yes. There's no reasoning behind it. It was a series of happy accidents. I didn't start with a plan aged 18 and do it — it's been up, down, left, right ever since. And it's given me a lot of breadth.

Bisnow: Let's talk about the day job. What is the game plan for Kadans in the UK?

Sheppard: We're about laboratories, not about "laboratory-enabled" floorspace, a term which means absolutely nothing. What we're about is specialist buildings in highly knowledge-dense environments, whether that's under one roof in a building at Canary Wharf or a campus in Cambridge. We're bringing together the various actors in life science to drive better outcomes for tenants and for real estate. We're a convener, if you like.

Bisnow: What's the problem Kadans UK is out to solve?

Sheppard: The answer is, long-term market failure. There's been chronic underinvestment in the commercial infrastructure for science businesses, hardly anything except a handful of public sector projects. The good news is that in the last five years the market has changed unrecognisably — there was just us, Bruntwood SciTech, Blackstone's BioMed Realty. Now there's 10 times as many involved. But relatively few understand the risks, and that's where we can make a difference.

Bisnow: Risks? What did you have in mind?

Sheppard: The risks of designing and operating laboratory floorspace. For instance, the first piece of due diligence we do on potential development sites is to look at the power grid, because laboratories typically need 400% as much power as an office building, and having to upgrade the supply comes at a huge cost. There have been several sites we've looked at, but then pulled out because it was too expensive to upgrade power, and others have since bought them. I won't name the sites; I don't want to throw the new owners under a bus.

Bisnow: Is it just about power supply?

Sheppard: No, there's operational obstacles. For instance, how you handle liquid nitrogen. It is used by 90% of life science businesses, but it's very dangerous stuff. You need to equip buildings with oxygen depletion monitors, override systems and you need to be able to move the stuff around safely — you can't just put liquid nitrogen in a normal passenger or goods lift. Think about issues like this first, from day one, and the cost to the developer is negligible. But if you have to retrofit, it will cost you hundreds of thousands of pounds.

Bisnow: Where next for Kadans in the UK? Manchester, Birmingham, Leeds — or more focused on London, Oxford and Cambridge?  

Sheppard: Birmingham has a small market, very small by global standards, so we're following what Bruntwood SciTech are doing there and waiting to see how the city evolves over time. We've already announced our first project in Manchester, [a £200M campus site near the university in partnership with McLaren Property, Property Alliance Group, Moda and Pioneer Group]. We're very enthused by what's happened there over the last decade. Bruntwood SciTech have proved there's a market.

We're doing due diligence on potential sites in Bristol, Edinburgh and Glasgow, and we've looked in Leeds and Southampton, although we don't currently have anything in our sights. So, yes, the core market is London, Cambridge, Oxford. Add it up and if we deliver everything in the pipeline, that's 2.5M SF, rising to 3M SF in three years.

Bisnow: That sounds like measured growth, not massive acceleration.

Sheppard: That's right. We have footholds in all the major markets. Growth is about where we can add value to a life science ecosystem. Manchester is a key example. It's about good deals in good locations.

Bisnow: Is there an obstacle or trip hazard that could mess this up?

Sheppard: It's not so much a trip hazard as a speed bump, because whilst government rhetoric on science policy has been very positive — a real step change — words don't necessarily translate into pounds and pence. We need to see more investment, and a government with an interest in science. Without that we'll see a significant downturn because we've already got pressures on the science sector like funding issues in the NHS and the funding ecosystem for early stage ventures. 

Bisnow: Does that mean a change of government, Conservative to Labour, worries you? 

Sheppard: I've been pleased to see more positive messages from Labour on business and the economy, although we don't yet have enough detail on potential science policy to draw meaningful conclusions. At the moment the question between the parties is about different faces but the same issues.

Bisnow: Let's leave the office and head back home. What is your weekend routine or preferred weekend activity?

Sheppard: I have two children under 3 years old, so weekends are rather chaotic — gone are the days of golf and long lunches, but I love it. It brings you back down to earth rapidly. The thing about kids is they don't care if it's a good week at work or not. They want to do the things under-3s do, that's all. And since I've never been very good at switching off, having kids has forced me to do that. You can't write a presentation when someone's shouting, "Daddy! Daddy! Daddy!" at you. It's a great leveller. 

Bisnow: When there's time for something else, what do you reach for? 

Sheppard: Contrary to my very middle-class English accent, I'm a born-and-bred Welshman from Pontypridd. So I'm a big rugby fan. I love watching Wales or the Cardiff Blues. That's what my spare moments are about.

Bisnow: Give us a bold prediction for the rest of the year. 

Sheppard: We're going to see more of a process that's already begun and has accelerated over the last few months, which is the development of a two-tier market in life science property in the UK. We'll have one group who know what they are doing and can design and operate laboratories. And we'll have others who have a great marketing department, or investors who are pushing them to get into this, but they aren't committed, and the quality of their work will be poor.