Demand for UK lab and office space could rise in the second half of the year thanks to new proposals put forward by the government coupled with the uptick in venture capital (VC) funding into the UK’s pharma and biotech sectors in H1 2024, according to new data from Knight Frank.
The company’s figures show demand for lab space in Oxford rose 63% quarter-on-quarter in Q2 to 387,000 sq ft, with demand in Cambridge remaining steady at 667,000 sq ft. London saw Q2 demand fall as some occupiers put their search for space on hold in light of persistent economic and political instability.
However, Knight Frank expects demand for lab and office space to increase in the second half of the year after the UK’s pharma and biotech sectors experienced a 77% year-on-year jump in VC funding in H1 2024.
The UK now accounts for circa 5% of global market share for pharma and biotech VC funding – only the US and China attract a greater share of venture capital globally.
Jennifer Townsend, partner at Knight Frank, said: “The UK has cemented its position as a prime incubator for life sciences start-ups. As the domestic macroeconomic and political landscape stabilises, the sector is poised for further growth, drawing increased venture capital. While recent months have seen subdued take-up, with some activity paused and a lack of large transactions, demand remains steady, especially for smaller units suited to nurturing pharma and biotech startups.
“An uptick in activity is anticipated in the second half of the year and into 2025. However, to fully capitalise on this potential, start-ups need comprehensive support to scale operations within the UK and bring innovations to market successfully.”
Emma Goodford, head of life science and innovation at Knight Frank, added: “With cost pressures easing and the new Labour government injecting some much-needed certainty and stability into the UK market, as well as potentially implementing supportive new planning policies, it is anticipated that a growing number of development opportunities will be unlocked toward the end of 2024 and into next year.
“The delivery of new high-quality space remains a key barrier to converting high-growth start-ups into flourishing, sustainable businesses. With the life sciences sector a key driver of future growth for the UK economy, it is imperative that the government throw its full support behind property companies capable of meeting the requirements of life science companies in core markets across the Golden Triangle and beyond.
“As well as investing to deliver more space, there is a critical need for skilled talent, new pathways to commercialisation and essential infrastructure for the sector, not least data centres, power and housing. The real estate sector can play a crucial role beyond merely providing space, with proactive real estate partners capable of establishing and curating environments which encourage the delivery of these other elements.”
