Investment and sentiment bode well for UK life sciences

The UK life sciences sector ranks third globally for inward investment, leading the field across Europe, and looks set for robust expansion over the next five to ten years.

Encompassing industries such as pharmaceuticals, biotechnology, medical technology and the life sciences themselves, the sector accounts for more than £43bn in gross value added across the domestic economy and provides close to 650,000 jobs, PwC estimates.

The past few years have also seen the government focus increasingly on nurturing the sector, with the 2021 Life Sciences Vision and Labour's Prescription for growth, which highlight ambitions to enhance the UK's standing as a world leader in the sector. Moreover, the market is set to gain from recently rejoining Horizon Europe, a collaborative EU research programme with funding equivalent to around £80bn until 2027.

In turn, all of these initiatives should encourage growth in occupier demand for commercial real estate specially designed for the life sciences. This includes facilities such as laboratories, good manufacturing practice-compliant manufacturing suites, clean rooms, cold storage, vivaria and collaborative research spaces, as well as other infrastructure tailored to scientific research.

The UK's largest life sciences cluster – the golden triangle of university cities Oxford, Cambridge and London – saw take-up of almost 460,000 sq. ft (43,000m²) in 2024 according to Cushman & Wakefield research. The consultancy expects leasing activity to increase over the course of this year.

In addition, the scale of the development pipeline perhaps warrants some caution, with CBRE estimates showing that the amount of lab and life sciences space under construction across the golden triangle is set almost to double between 2024 and 2025 to around 1.8 million sq. ft (167,000m²).

Meanwhile, a little more than 2 million sq. ft (186,000m²) is expected to be in development by the end of 2026. If this growth is not matched by a resurgence in take-up, developers and investors may not achieve the level of returns they had initially expected.

In the US, overexuberant delivery of life sciences space in some markets, such as Boston, has resulted in oversupply issues. This has led to a sharp rise in vacancy rates, which currently stand at around 20% according to CBRE.

This weakness is also evident in the RICS US Commercial Property Monitor data, with both 12-month rental and capital value expectations for life sciences turning negative in the third quarter of last year, although they have since stabilised.

This marks an 8% rise compared to 2023 and sits 36% above the average over the past ten years, Carter Jonas estimates. Although such funding is still considerably below the levels seen during the pandemic-induced surge in 2021, the 2024 total was still the second strongest year on record. This points to a renewed impetus, which should bode well for tenant demand. 

Cushman & Wakefield research shows that investment volumes across the golden triangle totalled £730m in 2024, representing a 37% increase on 2023, which again points to activity moving in the right direction after a pullback the previous year.

Importantly, cities such as Birmingham, Bristol and Manchester are also attracting investment, with the latter now included in Savills' global index of the top 30 life sciences markets – helped by a particularly solid business and funding environment compared to other hubs.

Naturally, strong rental growth, as a function of the balance between supply and demand, has been an important catalyst for development activity across the sector. Demonstrating this, Savills research points to rents for lab space across Cambridge and Oxford rising by roughly 50% and 70% respectively from 2021 to 2024.

Admittedly, the strong development pipeline and more moderate absorption levels of late is likely to result in slower growth in the short term.

Although these expectations have been scaled back somewhat in recent quarters, the sector is still anticipated to be one of the top performers compared to most others tracked (see Figure 1).

In fact, life sciences rental growth projections are only bested by data centres and multi-family residential, while they comfortably exceed expectations for both prime and secondary tiers of the traditional office, industrial and retail market segments.

In terms of capital values, despite the relatively restrictive interest rate environment and the slight upwards movement seen in ten-year bond yields since late 2024, a net balance of +48% of respondents to the Q1 2025 RICS UK Commercial Property Monitor foresee UK life sciences commercial real estate valuations rising over the coming 12 months to the end of Q1 2026.

This compares to a net balance of just +5%, on average, when looking at the mainstream commercial property sectors.

Recent years have seen a significant increase in supply, with a lot of life sciences space becoming available at a time when growth in tenant demand has declined.

Nevertheless, given that the UK market typically operates under very different conditions to those in the US, with speculative development much more limited and the planning system more restrictive, this is unlikely to cause a massive imbalance, even if, as already discussed, growth in rents may slow in the near term.

Notwithstanding the slightly more tempered outlook over a shorter time frame, there are still many reasons to expect life sciences to be one of the better-performing commercial real estate markets over the coming decade.