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One of the world’s largest asset managers is preparing to spend almost €2bn on specialist laboratory space and offices in Europe, a sign of the fast-growing institutional interest in the life science sector.
Life science properties are among the hottest assets for real estate investors at the moment. Relatively well-established in North America, the sector is developing rapidly in Europe, with the UK a particular target.
Axa IM Alts, a division of French fund group Axa Investment Managers, has raised €1.9bn, which will be invested through Kadans Science Partner, a science park developer that Axa bought last year.
“The life sciences story is probably the most exciting one for real estate investment in Europe right now,” said Timothé Rauly, global head of fund management at AXA IM Alts.
Half of the funds raised will be spent on developing new assets, with the Netherlands, UK, Germany and France likely targets. The other half will go to upgrading or repurposing existing Kadans assets.
Institutions are piling into the sector in the hope that the increased focus on science and innovation caused by the pandemic will propel growth.
Properties vary from standard offices to sophisticated lab space, and location is a key determinant of value.
The “golden triangle” between Cambridge, Oxford and London, which commands a premium because of its proximity to top universities and research centres such as the Crick Institute in King’s Cross, has been a target for investors in recent months.
Magdalen College is testing investor appetite in the Oxford Science Park. The college is aiming to sell its stake for about £100m, according to people with knowledge of the deal, a sevenfold increase in value since it bought the share five years ago.
“Staying within the existing European clusters is quite important and in our view where you will benefit from rental growth,” said Rauly. The golden triangle is “definitely a location we will continue looking to invest in,” he added.
Before the pandemic, investors were attracted to the sector by the relative security of income it offered, said Steven Lang, who focuses on life sciences as part of Savills’ commercial property research team.
Transactions have increased in recent months as investors move away from the sectors hardest hit by coronavirus, such as retail and hospitality, and into areas they believe will flourish post-pandemic: student housing, logistics, retirement homes and life sciences.
Blackstone and Brookfield, both of which own substantial life sciences portfolios, have been increasing their investment in the sector over the past 12 months.
“Covid is just a catalyst . . . a whole generation now wants to be like Chris Whitty [the chief medical officer for England]. There is infinite demand in this subject area,” said Lang.