Investment worth billions is expected to maintain recent growth in UK R&D facilities. So what factors are crucial to winning work from demanding blue-chip clients in this highly complex sector?
In Cambridge the taxi drivers joke about ‘Cranebridge’ because of the 30-odd tower cranes that dominate the horizon.
The city’s cluttered skyline is the most obvious indication, but by no means the only evidence, of the growth of the UK science and research parks sector.
AMA Research reports that in 1982 there were two UK science parks. By 2014 that figure had grown to around 104 and the government estimates that investment in R&D by UK businesses in that year, the latest for which figures are available, totalled £19.9bn.
Science and research parks are private or public-private partnership developments that provide office and lab space for predominantly science and research-based businesses – many of which operate in the digital technology and life sciences sectors.
Such schemes have benefited in recent years from the vast expansion of consumer computing and electronics, but also from structural changes in the pharmaceutical sector.
In recent years the profitability of big drug development and manufacturing businesses has come under pressure. Patents on some of the most lucrative ’blockbuster’ drugs have run out, or will soon expire, and the public healthcare sector has begun to limit its expenditure on branded medicines.
Cambridge Science Park 1
As a consequence, pharmaceutical firms have switched their focus from mass market medicines to high-value specialist drugs and the sector has seen mergers and acquisitions activity as companies look to consolidate and cut costs.
In property terms, that has prompted companies like GlaxoSmithKline (GSK), AstraZeneca and Pfizer to close down some of their big out-of-town campuses, where they formerly combined research, testing and manufacturing activities.
Instead they have increasingly begun to locate on science and research developments where they can be at the centre of a life science cluster together with smaller companies, universities, research institutes and hospitals.
AstraZeneca is building its new £330m corporate HQ and global R&D centre at the Cambridge Biomedical Campus, where an array of biomedical companies and research establishments is growing around Addenbrooke’s Hospital.
Papworth Hospital NHS Foundation Trust is overseeing the new 310-bed Papworth Hospital, which is on site and expected to open in 2018. Within the commercial element of the scheme, developers Liberty Property Trust and Countryside are set to construct a 9,000 sq m facility pre-let to Abcam, which supplies protein research tools to life scientists, subject to planning permission being granted for the second phase of development.
The park’s project director Jeanette Walker explains: “AstraZeneca is saying, ‘We can no longer do everything from early discovery research through clinical trials, manufacturing, sales and marketing ourselves’. Partnerships, collaboration, community and open innovation are increasingly important.
“If you look at the way AstraZeneca has designed its new building, the ground floor has floor-to-ceiling glass windows. In the old days you would never have been able to see into a lab. That new approach is reflected in the way it designs its research facilities.”
At the Stevenage Bioscience Catalyst scheme, GSK is using the same strategy in reverse, says Chris Green, a director at SQW, which provides consultancy services for science park developers and operators.
“If you look at the way AstraZeneca has designed its new building, the ground floor has floor to ceiling glass windows. In the old days you would never have been able to see into a lab”
Jeanette Walker, Cambridge Biomedical Campus
“GSK built a huge research facility there and now it is building an innovation centre and trying to create an open innovation environment on its own campus by having other companies locate there,” he says. “Big bioscience companies have been pretty poor at innovating new products, so GSK thinks the way to go is to work more closely with researchers at small firms.”
Scientific breakthroughs have helped to drive demand for space. Genomic research has opened up the possibility of tailoring therapies to an individual’s genetic make-up, while and the use of mobile electronic devices to monitor health is creating excitement in the medical technology sector.
“If I was to focus on one or two areas it would be biotech and med tech,” says Kaleigh Haeg, life sciences specialist at consultant Colliers International.
Illumina Granta Park cgi 2
“Med tech is the newest one. Google Life Sciences and people within the tech world are starting to get into med tech through things like wearables. Your phone is now going to be able to collect all the information about you. If I was to put my money into anything it would be that and personalised medicine.”
Doug Cuff, director at US life sciences property specialist BioMed Realty, has a similar view: “Genomics and specialised medicine are big drivers in the market right now,” he says.
His company is developing a £62m facility at Granta Park near Cambridge for Illumina, which sells DNA sequencing technology, and a £23m building for biopharmaceutical research company Gilead Sciences.
Cambridge forms one corner of the life sciences ‘golden triangle’ together with Oxford and London.
According to Ms Haeg’s research, the South-east of England is home to 1,896 life sciences companies generating £32bn annually. However, other parts of the UK have also succeeded in establishing scientific clusters.
“You want to be investing in places where clever people are doing clever things: Oxford, Cambridge, London, Bristol, Manchester, Edinburgh and Glasgow are the key locations for science park investment,” says Oxford Science Park managing director Piers Scrimshaw-Wright.
Oxford Science Park
Universities are frequently at the heart of successful science parks, and most have some sort of link to a higher education establishment or research institute. Academics generate the research that produces small start-up companies.
On some science parks, universities are also the principal investors: Oxford Science Park is owned by Magdalen College; Cambridge Science Park by Trinity College. Where university links are weaker, hospitals and big pharmaceutical companies can also help to draw in occupiers.
The process of establishing a new science park typically begins with the creation of an innovation centre where start-ups can be offered flexible short-term licences. Those companies grow and acquire more space or are swallowed up by larger firms that provide the capital to develop their ideas.
“You want to be investing in places where clever people are doing clever things: Oxford, Cambridge, London, Bristol, Manchester, Edinburgh and Glasgow are the key locations for science park investment”
Piers Scrimshaw-Wright, Oxford Science Park
“There is more recognition of how important it is to have an innovation centre that is the seedbed for the next generation of SMEs. That comes with a bit of risk because you are letting to weak covenants on very short leases,” Mr Scrimshaw-Wright says.
Innovation centres usually require financial support. Public funding is scarcer than it was a decade ago, so in some cases universities themselves are now stepping in with funding.
“The most active sector at the moment is the development of buildings for life science SMEs,” says David Lupson, director at consultant CAM-SCI.
He points to three such projects currently under way, each around 75,000 sq ft in size. The University of Reading is funding the construction of a first building at Thames Valley Science Park, while council-backed bioscience incubators are being developed in Nottingham and Newcastle.
It is not enough to simply build an innovation centre and expect tenants to flock to a park though: “Build it and they will come is an assertion I deny,” Mr Lupson says.
“A number of facilities have been built where they haven’t come. Build the right thing, understand your market and operate it in the right way, and then you substantially mitigate the risk. There is no one-size-fits-all solution. Each project requires a business plan optimised for the location, socio-economic factors, university links and funding.”
In the US, the science park market is dominated by BioMed Realty and Alexandria Real Estate Equities, but they have only one scheme each in the UK: BioMed at Granta Park and Alexandria at the Edinburgh Bioquarter.
Domestic property companies have been unable to establish pre-eminence either, despite including some of the biggest names in the UK property industry. MEPC runs Milton Park in Oxfordshire; Palmer Capital owns Colworth Park in Bedfordshire where Wrenbridge is the developer and has a stake in Discovery Park in Kent; Quintain operates Bristol and Bath Science Park; and Bruntwood operates five campuses around Manchester.
Earlier this year, investment manager Angelo Gordon and Trinity Investment Management became the latest entrant to the market with the £95m purchase of Mars Pension Fund’s Business Environments for Science and Technology (BEST) portfolio of five science parks in Edinburgh, Teesside, Hampshire, Manchester and Kent.
ISG cell therapy catapult Guy s Hospital London 3
“No-one in the science park market has leadership and critical mass. It remains a very fragmented market,” Mr Scrimshaw-Wright says.
Substantial pre-letting deals are a feature of the market, but because tech-based firms frequently need to grow quickly, landlords also employ speculative development to attract tenants that want a building immediately.
At Oxford Science Park, Mr Scrimshaw-Wright is planning to begin construction of a 61,000 sq ft speculative building early next year, and at Cambridge Science Park contractor SDC has already begun construction of a 65,000 sq ft speculative building.
“Building a vanilla office block is one thing. Building a specialised research lab is very different, so demonstrating that you have the right team to provide these extremely complex buildings is crucial”
Jeanette Walker, Cambridge Biomedical Campus
Will Heigham, head of the Cambridge office agency team at Bidwells, which manages the scheme on behalf of Trinity College, says that terms are close to being agreed to let the whole building before completion.
Both developments have tried to incorporate flexibility into the design so that they can suit both office and laboratory users. “On science parks the landlord will be trying to second guess the type of research that will be undertaken in the building so they can futureproof it,” says Bidwells head of project management Nick Pettit.
“If you are building an office block it is fairly simple to go with the British Council for Offices guidance on floor-to-ceiling heights and floor loading, but if you are trying to let a building to a research organisation then you have greater challenges with regard to the size and scope of the mechanical and electrical provisions that need to be in it.
“Do you need lots more air movement or vibration-free structures? What do you build in for flexibility in the future? A tenant may only have a 10-year lease so what do you do for the other 40 years of the building’s life? Your decision-making at the front end is quite difficult to get right.”
RAL space tech centre Harwell Campus Willmott Dixon 2
Laboratory occupiers also want greater flexibility so that their premises can be adapted to different research programmes over time. “Science doesn’t stand still. What might be suitable today might not be in five to 10 years’ time,” Ms Walker says. “Creating buildings that stand the test of time is extremely challenging and contractors with experience in this sector clearly have an advantage.”
Contractors Kier, Morgan Sindall and Skanska are currently working on various projects at the Cambridge Biomedical Campus.
“Building a vanilla office block is one thing,” Ms Walker says. “Building a specialised research lab is very different, so demonstrating that you have the right team to provide these extremely complex buildings is crucial.”
What lies ahead
Extensive forward planning is essential for successful project delivery in the sector, argues Willmott Dixon deputy managing director Nick Gibb. His firm is building the £26m life sciences building at BioCity in Nottingham and recently completed the £23m Rutherford Appleton Laboratory space development and test facility at Harwell Campus in Oxfordshire.
“We spend a lot of time doing computer modelling and working out where every bit of equipment goes and looking at potential clashes so we get it absolutely right before we go on site,” he says. “That is very different to many parts of the construction industry where you can get on site and work it out as you go. It requires a very defined approach in the design stage.”
Paul Sharp is divisional director for R&D and healthcare at ISG’s UK engineering services business, which is undertaking around £110m of projects in the sector.
He stresses the importance of getting the engineering right: “You need resilient power, ventilation and pressure regimes.
“Sometimes medical gases need to be installed – argon, CO2, and also cryogenics like liquid helium and liquid nitrogen. Then there are the human health aspects associated with those services. Understanding the implications of this engineering is key to success with these facilities.
ISG Illumina HQ Chesterford Research Park 4
“There are specialists that provide those services, but when you are managing the construction you need to understand the nuances of individual installations, including the drivers and requirements of those specialist subcontractors.”
He expects the sector to grow further: “Our intelligence suggests that there will be £5.5bn of investment into the R&D sector in the UK alone this year. There is a huge market there and with the advent of the Northern Powerhouse there will be more facilities in the North of England.”
Mr Green says that growth has tended to come in “fits and starts” depending upon the popularity of the technology sector among investors.
The fallout from the EU referendum has caused some consternation in scientific circles about the continued attractiveness of the UK as a destination for scientific research (see box, below).
However, technology firms locate where they can exploit the brightest minds and so long as UK universities continue to thrive then the future of the sector seems assured.
Many UK scientists reacted to the EU referendum result with dismay. A poll of 2,000 of them by scientific journal Nature in March found that 83 per cent wanted to remain in the EU.
Funding is one of the sector’s chief concerns. The EU has earmarked €120bn for research between 2014 and 2020 and the UK has hitherto been a net beneficiary of European funding.
From 2007 to 2013, the UK contributed an estimated €5.4bn to EU research and development. During that time period, it received €8.8bn in EU funding according to a report by the Royal Society published earlier this year.
Scientists also fear a loss of mobility across national boundaries, although some Brexit supporters argue that the ability of highly skilled researchers to gain visas will be unaffected.
In addition, concerns have been raised about the future of the European Space Agency facility at the Harwell Campus in Oxfordshire. However, because the ESA is an inter-governmental organisation that is separate from the EU it is unlikely to be affected by Brexit, although the UK’s participation in joint ESA-EU initiatives may be in jeopardy.
The climate of uncertainty may impede the development of R&D property, suggests SQW director Chris Green.
“There is certainly a danger that investment will reduce considerably,” he warns. “Some big science facilities get quite a lot of funding from the EU at the moment. That will become less certain, so the UK becomes a slightly less attractive place to move to and property investors may be less willing to fund buildings.”
Many of the researchers on the Cambridge Biomedical Campus are foreign nationals and around a fifth of biomedical companies in Cambridge are headquartered outside the UK, says the park’s project director Jeanette Walker.
“In this sector, if you are seeking large pre-lets on long leases you are looking at blue-chip companies and many of those will be foreign-owned. What impact Brexit will have on foreign direct investment, we don’t yet know,” she says.
James Dipple, managing director of MEPC, which owns the Milton Park science park in Oxfordshire, agrees that it is too early to evaluate the potential impact of Brexit on the sector, but he is not overly concerned at this stage.
“Irrespective of what is happening at the moment a lot of these companies have funding for research programmes through the next few years. They are looking long term and there will always be peaks and troughs in economies so they are more than capable of weathering the storm,” he argues.
As with so many other facets of national life, it could be months or even years before the result of Brexit on the country’s scientific community is known.