Blueprints For Growth: Perspectives On Life Sciences & Innovation Investments

What would your ideal location for a science park be?

Dan May: We, as Socius, want to move away from the traditional out of town science park – we don't believe that is the right approach to attract talent and create a vibrant, living community. The 'science park' model involves very little interaction or collaboration beyond the colleagues that work within a single asset. Also, long commutes and large car parks aren't sustainable or a good use of land or resources. We think the answer to this is 'Science In the City'. The future research hub needs a placemaking approach with a balance of education, employment, leisure and residential uses. That's one of the key benefits of our Cancer Hub site in London Borough of Sutton.

What's the one most important value add on a science park?

Dan May: The most important (and obvious!) value add is the creation and maintenance of the science ecosystem. The delivery of an impactful and effective ecosystem is a specialised skillset and something that Populate is looking to evolve at the London Cancer Hub from early next year. Ideally you want an environment that encourages collaboration between occupiers, research institutions and treatment providers, while being sensitive and conscious of their commercial IP. We think the mix of work and play uses helps to develop and nurture the park ecosystem.

Sophie White: I agree that the ecosystem is a key driving factor of success. This is in part why Aviva was so keen to invest in The Cancer Hub in Sutton as the adjacency to Royal Marsden and the Institute of Cancer Research means there is already very special foundations in terms of oncology research and treatment. Working with Populate and Socius we see a huge opportunity to grow and develop this further.

What's the biggest thing that can go wrong on a science park?

Dan May: If a park lacks amenities and after-hours interest - which they tend to - it will struggle to meet its real potential (and from an investor's perspective that feeds through into asset values). Life Sciences is not a 9-5pm concept: it needs a full-service offering supported with leisure, accommodation and other uses. We are seeing this trend accelerate in the leading global destinations for Life Sciences. We think there will be a bifurcation of the market between science parks and integrated, urban locations.

Sophie White: As we mentioned earlier, collaboration is key. The historical theme around business parks and the limited offer around food and beverage (remember the old sandwich van?) does nothing to build connections between people or give them the positive experience that people increasingly want if they are travelling to the office. With the benefit of space we can deliver a diversity of development that means the place has life around the clock and is interesting rather than just the 'commuter office'.

What do you think will be the biggest change in the sector over the next five years?

Dan May: A more supportive UK government could be transformative, but it's too soon to tell how helpful the current government rhetoric will be. In tandem to this, within the next five years the sector should start to see the impact of the 2023 Mansion House compact. The company commits some of the largest UK pension schemes, including Aviva, to allocate at least 5% of their default funds to unlisted equities by 2030. In theory, this could unlock up to £50bn of investment into high growth companies by the end of the decade. With the right investment infrastructure, the UK life science sector could be well-placed to capitalise on this.

What do you think is the biggest challenge faced by the sector over the next five years?

Dan May: As the market matures in the UK, we need to be careful to ensure that the market doesn't become imbalanced with supply outweighing the demand. We witnessed a similar situation in San Francisco when we visited this year, where the heavily subsidised sub-letting market is fundamentally disrupting the take-up of new stock.

I am also mindful of developments that get two things fundamentally wrong – location and generalisation. Where we are lucky with the London Cancer Hub is that we are building alongside two globally recognised institutions – the Royal Marsden Hospital and the Institute for Cancer Research – who (unsurprisingly!) specialise in oncology. Oncology continues to attract the greatest amount of venture capital, which bodes well for us.

Sophie White: I would agree that we need to recognise as an industry that it doesn't work everywhere. Post the pandemic there was a significant surge in investment into early research and startups which led to a market view that demand far outstripped supply. For a while it seemed that every surplus office building was rebadged as a life science opportunity. That initial excitement has settled and as Dan notes we have been lucky enough to visit some of the more mature markets in the US and Europe to learn lessons from experience elsewhere.

What would your ideal occupier look like?

Dan May: Deep pockets and excellent covenant strength! Or a promising start up with no track record but good prospects. Joking aside, the right occupier mix is essential. Thinking about our site in Sutton, we will need micro, medium and large occupiers to ensure that we have innovation, expansion, and stability, and that no single tenant becomes too dominant or stagnant. The focus is on attracting tenant clusters who are open to collaboration, but ambitious enough to give back. We are considering a 'social charter' for our sites to encourage tenants to give back to their local communities, which would be facilitated and supported by Populate.

Sophie White: As an investor the profile and strength of tenants is critical. We are balancing placemaking and innovation with the need for positive investment yields which will perform in the long term. Aviva Capital Partners do believe though that being dynamic in the early years of delivery and focussed curation will lead to a more positive place in the long term which will drive yield and returns and are able to take a more holistic view to drive returns.

How does your ESG strategy play into your life science investments?

Dan May: Historically 'E' has got the most attention, and it is probably the easiest to get 'right'. In Sutton, we will be delivering BREEAM Outstanding and some of the lowest carbon labs in the country, but we are also evolving our approach to ENG (environmental net gain rather than simply focusing on biodiversity net gain).

The 'G' is probably the least talked about, and many question its appropriateness in 'ESG' at all. However, we believe that Populate, in its role as an active and engage 'place manager', will provide the investor and tenants with a much more user-friendly, data-driven approach to supporting their corporate governance objectives.

To realise the full impact of the 'S' we need to focus on 'people' and humanise the numbers and the jargon. Creating meaningful social value should be demonstrable and beneficial to those that participate in or around the site. In Sutton we are trying to open a dialogue with local colleges and universities to ensure that we are shaping future curriculums to focus beyond the 'professors', and think about the importance of the lab technicians, data analysts, campus curators and porters.

Is there anything that other life science investors are doing that you really admire?

Dan May: We have spent quite a bit of time recently learning what developers and investors in the US have done and trying to understand what they do that works well.

The most impressive thing that good US operators do is that they get under the skin of what their tenants want and need on an operational level – and respond, accordingly. This will be a focus for us at the London Cancer Hub.

What advice would you give someone looking to invest in the sector?

Dan May: Especially in London you need a differentiator, you need a specialism to give you an edge over competitors. Dipping your toe into life sciences will not cut it. Instead, it needs focus and a willingness to work with the tenants to understand their needs and make their lives easier.

As I said earlier, I think location and differentiation, or a specialism, is absolutely key, but, equally, having the necessary expertise in all the wrap-around services that are required to give the ecosystem longevity and excitement.

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