Demand for life science assets on the rise in Australia
Demand for life science assets on the rise in Australia – Source: Pixabay/Pexels
  • The life sciences industry is emerging as a growth sector across Australia
  • Australia’s ageing population is generating more demand for the industry
  • Increased levels of investment from pharmaceutical companies and government

The life sciences industry is rapidly emerging as a major growth sector in Australia on the back of an ageing population and increased levels of funding and investment according to a new report.

According to CBRE’s Healthcare Report, there is a significant shortage of quality life science facilities in Australia and only a small number of investors are seeking exposure in this emerging asset class.

The industry includes a range of businesses, such as medical laboratories, medical research organisations, health manufacturing, pharmaceutical companies, contract research organisations (CROs), biotech firms, contract manufacturing organisations (CMOs), and genomics.

CBRE’s Director of the Australian Healthcare and Social Infrastructure team, Sandro Peluso said the asset class is smaller and relatively new and is only now beginning to emerge.

He said, “There is a growing investor appetite for Life Sciences venture capital and private investment opportunities. However, there is a shortage of quality Life Sciences facilities available in Australia and a lack of historical transaction evidence associated with this emerging asset class.”

Emerging sector

The report said the biggest concern for investors is always the lack of historical evidence associated with an emerging asset class.

However, compared to core commercial real estate investment where the average lease expiry sits at 5-7 years, life science operators often commit to long lease terms of 10-15 years or more due to the capital needed to set up such facilities.

Furthermore, with a record low vacancy rate, having a life science operator in a facility is likely to drastically increase its market appeal when it comes time to sell significantly.

Mr Peluso said investors are already started to seek out quality assets in the life science field.

“One recent transaction has involved BRC Capital acquiring a major site within Melbourne’s Arden urban renewal precinct, with the potential to create a $600 million mixed-use health hub in what is tipped to be Melbourne’s next major health and biomedical hub.”

One of the key reasons for future growth is the rise in the average age in Australia, which is expected to increase significantly, leading to rising demand for medical treatment and life-extending products.

According to the report, Australia’s population aged 85 and above is projected to increase from 534,000 in 2021 to 1.28 million by 2041, representing an increase of 140%.

Since the beginning of 2010, total government research spending allocated for health sits at 16.5%, compared to a median of 7.8% in other countries.

More funding and investment

Additionally, the Australian government uses the National Health and Medical Research Council, Biomedical Translation Fund, and the Medical Research Future Fund, alongside university grants, to fund health and medical research.

Pharmaceutical companies are also expanding their production capabilities in Australia, including R&D, manufacturing and distribution.

Life sciences businesses are also active in real estate acquisition, disposition, and debt and equity recapitalisation strategies across the continuum of care, including medical, specialised and general care, long-term acute care, and other rehabilitation and post-acute care operations according to the report.

Mr Peluso said, “Developers and investors are also focussed on the sector’s strong underlying fundamentals, including increased government funding and Australia’s ageing population, with 140% growth projected in the 85 and above age bracket by 2041.”

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