Investing in Life Sciences Real Estate: Design

Life sciences businesses can occupy offices, laboratories, industrial buildings, or a combination of the three. Laboratories, wet or dry, can be offered to tenants as fully fitted, open plan, or as a shell and core. Getting the building’s design and specification correct, from the beginning, is an essential element of success.

SIZE MATTERS. Lab requirements change as companies grow so
make sure you know the segment of the market you are catering for.

Start-ups

Incubators offer ‘fully catered’ small spaces on flexible terms to scientists taking the first steps out of the lab with their ideas. They may need lab space, but not necessarily all of the time. Grassroots in Oxford is one example, offering mentoring as well as dedicated space. Accelerators cater for scale-ups on similar terms.

Intermediate-stage companies

It is more challenging to cater for intermediate-stage companies
seeking 5,000-10,000 sq ft – not yet large enough to take their
own building. Typically, lease lengths are too long for companies
with unpredictable growth plans, which tend to outgrow space in
two to three years. The pace of growth means a pre-let is often
unattractive.

Larger companies

Tenants requiring 10-30,000 sq ft will have more stability, but usually also greater technical requirements. More established corporates will usually accept longer leases, and may prefer to take a building with a shell and core specification so it can design and fit-out its accommodation, as they will not be able to compromise on technical requirements.

Containment levels

In addition to biological grade facilities, you will need to consider which containment level the company occupying the lab space requires, and how this will impact the lab’s fit out. From Containment Level 1 Laboratory (CL1) and Containment Level 2 (CL2), Level 3 (CL3), Level 4 (CL4) for investigating diseases and viruses, to Cleanroom grade for firms investigating agri-tech – companies require varying amounts of building specification depending on which life sciences areas will take up their laboratory space.

Equipment

Often specialist laboratory equipment is purchased and owned by the tenant, leaving with them when they move on. But it’s this equipment that demands particular building requirements, so a changeable set-up for incoming tenants is ideal. Even larger entities will look for flexible alterations rights in their leases to facilitate work arising from unexpected chance discoveries.

Additionally, robotic lab systems and specialist instrumentation will need to be accommodated now and more so in the future.

Risk

Landlords also need to be prepared for the possibility that concepts may fail, requiring the lab to be repurposed for another venture, and possibly a new tenant. Evaluating the covenant strength of tenants is complex, and accounts will be heavily influenced by the stage of funding at which a company is at.