European life sciences real estate

The life sciences industry’s real estate demand goes beyond the traditional office or pharma manufacturing site. The processes within the sector call for specialized real estate, e.g., labs with secure water-waste treatment, rapid air circulation and change, or reinforced floors to meet maximum vibration criteria to maintain good manufacturing practices (GMP). GMP ensures that products made for patients, for example, are produced in a consistent and controlled manner, following strict quality standards. One of the core components of GMP is premises, which includes standards a building must meet if it is to be used for research and development (R&D) or manufacturing of a pharmaceutical product, for instance. Multiple countries have adopted GMP as a core condition for companies in the life sciences industry, forcing them to find buildings that are of adequate standards to meet the premises component of GMP. In many markets, those buildings are in short supply.

Increases in the demand for products and services made by the life sciences industry are likely to drive demand for life sciences real estate assets. This includes companies seeking premises to conduct R&D, manufacturing and other support processes to meet said demand. On the macro level, there are two important drivers for the life sciences industry (and its demand for life sciences real estate). For one, the demographic development shows the key age group that is the primary consumer of life sciences products – i.e., 65 and above – is growing at a much faster rate than the working-age population,¹ creating a long-term growing demand for its products. Another important factor that drives the demand for life sciences products is the fact that the world’s population is getting wealthier. Wealthy societies allocate a higher share of their income to purchase health services than mid- and low-income nations.² Within the life sciences industry are also interesting trends that are likely to shape its trajectory and its real estate leasing demand in the years to come. These include the validation of mRNA³ vaccines, increased use of artificial intelligence (AI), and geopolitical uncertainties driving companies towards building manufacturing capacities closer to the end consumer.

It should be noted that environmental, social and governance (ESG) factors are a focus in the life sciences industry, particularly its carbon footprint. As an example, as of end of April 2024, more than 110 life sciences companies had set themselves near-term targets to reduce their carbon footprint via the Science Based Targets Initiative (SBTs).⁴ Life sciences companies will require the real estate assets they occupy to be of high quality, especially in terms of energy efficiency and (operational) carbon footprint. It is crucial that any space developed to meet the life sciences industry’s specific requirements will also be able to meet its need for energy-efficient and carbon-light premises.

Sources:

1. World Bank, 2023
2. World Bank, 2023
3. Messenger RNA (abbreviated mRNA) is a type of single-stranded RNA involved in protein synthesis
4. sbti.org