[+] Life Sciences’ $10bn Growth Opportunity

Life sciences continues to boom as the industry’s revenue is forecast to grow to $10 billion in the next five years, and it’s all green lights for property investors. Superannuation funds and offshore capital are diving into the life sciences property sector, according to a report commissioned by Colliers and Harrison Street, while developers compete for prized land close to medical precincts. The life sciences alternative asset class includes biotechnology, pharmaceuticals, biomedical technologies, healthcare technologies and medical equipment, botanical science, and environmental sciences. It represents about 2 per cent of the total securitised property market in Australia, but the sector is growing and total assets under management are valued about $6.5 billion. Colliers national director of research Joanne Henderson says it’s an opportunity to diversify exposure and complete financial and social objectives. “The life sciences industry is clearly entering a significant stage of growth, accelerated by a renewed focus on health and biotechnology as a result of Covid-19,” Henderson says. “Record levels of capital raising have occurred over the past two years. “We expect that federal and local governments will continue to invest further in the health and life sciences sector, in addition to an increase in private investment and public private partnerships.” Australian biotechnology revenue The Urban Developer understands Covid-19 vaccine maker Moderna is pursuing a 2ha site close to Monash University for a dedicated vaccine-manufacturing facility. The Monash biomedical precinct is luring life science organisations looking to relocate to a dedicated precinct close to the university, and rent prices have gone up 15 per cent in the past 12 months. Cartherics recently took up a 1700sq m site near the new $500-million heart hospital next to Monash University. Australia has several life science hubs, including the Melbourne Biomedical Precinct, MedTech Knowledge Hub in NSW, Adelaide BioMed City, South Australian Health and Medical Research Institute (SAHMRI) and UNSW Health Translation Hub at Randwick. ASX-listed health sector entities have outperformed many other sectors and in the past 12 years have grown more than 300 per cent. It’s a growth trend Henderson is expecting to continue as government-led initiatives boost Australia’s sovereign capabilities to make essential medical supplies and vaccines. She says the niche nature of the sector provides an opportunity for developers to attract sticky tenants with specific needs. ▲ Dexus acquired The Australian Bragg Centre, a $500-million cancer centre, to be home to the first proton therapy unit in Australia, in the South Australia Health and Medical Research Institute. “New purpose-built developments will in many cases be the only option (for life sciences companies) and therefore provide opportunities for real estate investors and developers to capitalise on the growth outlook for this industry, whether through direct development opportunities or fund-through development transactions,” Henderson says. “[Life sciences have] specialised requirements for both the location—such as being close to hospitals, health institutes and universities—and the type of building required for a life sciences operator including laboratories, R&amp;D space and specialised storage requirements. “Also, the clustering effect on the success of health and life science companies has been proven and, as such, opportunities will exist for owners of potential development sites within close proximity to existing and planned health hubs surrounding major hospitals and universities.” As investment activity ramps up in the alternative asset class, Colliers head of transaction services in Asia Pacific healthcare Ian Sanders says REITS and superannuation funds are expected to move in with a capacity to absorb risk. Sanders says the life sciences sector was firmly in the crosshairs of super funds’ “patient capital”. “While the potential investment universe is large, the requirements for capital can be significant especially when linked to either the initial stages of the life sciences lifecycle or, alternatively, at the mature end of the spectrum,” Sanders said. “Like many alternative real estate asset classes, many life science companies look to lock in longer lease terms, given the more specialised nature of the space they occupy. Life science real estate offers a lower risk asset offering a long-term cash flow with reduced levels of rental downtime.” Dexus acquired a Monash University pharmaceutical building at Parkville for $138.7 million, and The Bragg Centre in Adelaide for about $500 million . There are more than 2600 organisations in the life sciences sector, which is up 43 per cent from 2019 levels. These are concentrated in Melbourne and Sydney around universities and major hospitals, with Brisbane, Gold Coast and Adelaide also growing as significant life sciences hubs. Main image: Gray Puksand You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Life Sciences’ $10bn Growth Opportunity

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