Demand for life science hubs grows
Demand for life science hubs grows – Source: Unsplash
  • The study says life sciences real estate across APAC reached 9.29 million square metres.
  • Major hubs lie in Melbourne, Sydney, Shanghai, Beijing, Tokyo and Singapore.
  • Investors raised US$18B toward life sciences real estate in past five years.

A new report by CBRE’s Australian Healthcare & Social Infrastructure team highlights that life sciences real estate in the APAC region has grown to 100 million leasable square feet (9.29 million square metres) – including hubs in Melbourne and Sydney – underpinned by an ageing and more health-conscious population, solid occupier demand and strong investor interest.

Across the APAC region, investment funds have raised US$18 billion to invest in life sciences real estate in the past five years, however, the report notes that there is a shortage of assets available for sale with limited sales volume to just US$717 million in 2022, less than one per cent of Asia Pacific’s total commercial real estate investment volume.

This is particularly the case in Australia, according to CBRE’s Australian Healthcare & Social Infrastructure team Director Sandro Peluso, although he notes that further activity is anticipated this year, with investors attracted to the low vacancy rates and long leases terms associated with life sciences assets, which typically average 10-15 years+ due to the capital required to establish new facilities.

An industry set for long-term growth

CBRE said that, while the major life sciences companies’ revenue growth has slowed after a period of significant expansion during the COVID-19 pandemic, the industry’s longer-term development is driven by the underlying trend of an ageing and more health-conscious population.

Life sciences hubs have already been established in cities across the Asia Pacific including Melbourne, Sydney, Shanghai, Beijing and Tokyo. Major new developments will be built in Shanghai Lingang Life Sciences Park, Hong Kong Lok Ma Chau Loop, and Labzone Bangalore Life Sciences Park in the coming years.

CBRE
Source: CBRE

Rent performance resilient

Life sciences clusters in the Asia Pacific are expanding substantially in recent years due to solid occupier demand. This in turn has allowed for resilient rent performance, even while these businesses experienced slowed revenue.

CBRE’s Australian Healthcare and Social Infrastructure team Director Sandro Peluso said that this was underpinning investor demand for life sciences-related assets in Australia, however, there was a lack of available opportunities.

Mr Peluso said, “One recent transaction 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.

“Further activity is anticipated this year, with investors attracted to the low vacancy rates and long lease terms associated with life sciences assets, which typically average 10-15 years+ due to the capital required to establish new facilities. This compares to average lease expiries of five to seven years on core commercial real estate investment assets” he said.

Mr Peluso said that developers and investors were also focused 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.

JV investment demand is strengthening

Investment funds have raised US$18 billion to invest in life sciences real estate in the past five years. A shortage of assets available for sale limited volume to just US$717 million in 2022, less than one per cent of Asia Pacific’s total commercial real estate investment volume.

Dr Henry Chin, Global Head of Investor Thought Leadership, Asia Pacific, for CBRE, said “As most life sciences facilities are purpose-built and self-owned by life sciences companies or government institutes, investors should consider forming joint ventures with landlords and life sciences operators to invest in the sector.

‘This has been done in both emerging markets such as China and India as well as mature markets including Singapore, Australia and Japan,’ he said.

Dr Chin said investors can also partner with developers or big pharmaceutical companies to participate in green field development or build-to-suit facilities or with government bodies for new life science park developments.

‘Another investment approach is to target life sciences-related assets by extending investment scope to medical offices healthcare projects and manufacturing plants,’ Dr Chin said.



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