HONG KONG (7 December, 2021) – A report from the Urban Land Institute (ULI) finds that a genuine opportunity exists for the real estate industry to engage in the structural growth of the life sciences sector in the Asia Pacific region, providing investors with yield and anti-cyclical diversification.

The report, Understanding the life sciences sector in Asia Pacific: the case for investment, finds that the life sciences sector is not yet well understood by the real estate industry in Asia Pacific or recognised as a distinct investment sector. Creating a less fragmented and more mature life sciences real estate (LSRE) market, as has been achieved in the United States, requires transparency and knowledge sharing.

The report recommends that the APAC real estate sector:

• Overcomes the lack of reliable data. Investment research companies should incorporate the life sciences space in their reporting from investors and developers, while real estate companies should publish rental rates and ownership/management information for health care properties, offices, and labs.
• Creates a life sciences real estate building specification guide.
• Works closely with government, both national and local, when it comes to strategic vision, location, workplace, building layout, target tenants and rental terms.
• Factors in to decision making global mega-trends such as housing affordability, ageing populations, competitiveness, and reliance on technology.
• Works with major life sciences tenants to better understand their needs and develop appropriate facilities.

The report assesses which cities and countries are best placed for investment in life sciences real estate. The locations with the best functioning innovation ecosystems are identified as Singapore and Hong Kong, followed by Mainland China and Japan. South Korea and Australia are ranked fifth and sixth respectively. Choice of location for companies and employees will also depend on the availability of funding for life sciences. In terms of absolute expenditure on research and development (R&D), China leads by some margin, but Singapore and South Korea come top by total spend on R&D per capita.

These factors are reflected in the top three destinations for investment in Asia Pacific LSRE over the period Q3 2015 to Q3 2021, which are China, South Korea and Japan. The main countries of origin for investors in Asia Pacific LSRE are, likewise, China, South Korea and Japan. The principal buyers of LSRE are developers (28%), fund managers (26%) and operators (24%). Four-fifths of those who transacted in this period did one deal only, which suggests that the market is quite fragmented.

The report presents insights gained from market participants through a survey of ULI members in the Asia Pacific region. Over half (57%) of respondents were interested in the life sciences sector because of competitive risk adjusted returns compared with other asset classes and the potential for capital growth. The greatest challenges to investment were lack of data to make informed decisions (43%), lack of experience (43%) and lack of suitable real estate (43%).

The trend towards urbanisation of the life sciences sector seen in some of the North American and European cities is less evident in the Asia Pacific region, where the preference remains with purpose-built parks, precincts and suburban locations. Participants showed a clear preference for scale, being most keen to invest in mixed-use life science campus (37%) and entire science parks or similar large scale developments (32%). The most productive types of location for life sciences were identified by respondents as business parks with some science/R&D facilities (43%), science parks (28%), urban clusters (14%) and university space (14%).

“The real estate community is playing an active role around the globe in supporting the ecosystems critical to the life sciences business life cycle,” said David Faulkner, president of the ULI Asia Pacific region. “Demographic trends promise strong and sustained growth for life sciences and that ought to present an attractive proposition for real estate investors and developers. Making the most of that opportunity will require industry knowledge and specialised real estate expertise, as well as the usual local market knowledge.”

“The most successful approaches will offer flexibility and collaboration while looking forward to the evolving requirements of life sciences tenants. The APAC real estate industry can’t assume that it will be able to replicate the city centre approach that has worked so well in Kendall Square in Boston or King’s Cross in London. The “Petri dishes” of commercial innovation and cross fertilization in the APAC countries might well prove to be the more traditional science park locations.”

The report details the structural growth drivers for life sciences, accelerated by the impact of COVID-19, and their impact on real estate requirements. An ageing population, living longer and healthier lives, drives continued development of preventative treatments, prescriptive drug cures and innovation. An increased prevalence of lifestyle diseases, associated with the spread of wealth and sedentary lifestyles, adds to demand. A shift into preventative medicine and genetic R&D is being accelerated by the application of digital tech, artificial intelligence and machine learning, and life sciences firms are employing more data scientists. This transition is generating new start-up and SME businesses that, in turn, drive demand for specialist and appropriately located real estate.

The report profiles some life sciences developments that illustrate the trends it describes:

• Biopolis is a custom-built R&D hub in Singapore, where diversity of the occupier base facilitates crossover and collaboration. Aimed broadly at the knowledge economy, Biopolis houses key growth sectors such as biomedical sciences, info-communications technology and media.
• Innovation Quarter Westmead in Sydney, Australia, aims to become the Southern Hemisphere’s leading commercial, health research, and education precinct – a multi-disciplinary research space that encourages collaboration between business, health and research, with the goal being to create a “living lab” that nurtures the sharing of knowledge and resources.
• Kanagawa Science Park is Japan’s first urban science park containing research rooms, laboratories, offices, a hotel, convenience shopping, and a post office all in a dense setting that measures just 5.5 hectares. Notably, it offers a wide range of office spaces for companies in various stages of growth, including co-working spaces, private offices of about 15 to 30 square metres for new ventures, and office lab spaces of 36 to 75 square metres for companies that have achieved some business traction and need to expand.
• Pangyo’s Techno Valley (PTV) is a technology cluster near Seoul, South Korea, for tech companies, including biotech. It has attracted a large group of software, gaming, entertainment and biotechnology businesses.
• Zhangjiang Science City in Shanghai has a broad range of occupiers across life sciences and technology, facilitating a genuine opportunity for cross-over to advance research and innovation. Its critical mass attracts high-level talent – of its 370,000 employees, 6,200 have a PhD qualification.

The report was funded and supported by a select group of ULI members participating in a steering group. Didobi was the research partner for the report, which was sponsored by AXA Investment Managers, Baker McKenzie, Charter Hall, IGIS Asset Management, Nuveen, and Savills.

Understanding the life sciences sector in Asia Pacific: the case for investment is available online at https://knowledge.uli.org/en/reports/research-reports/2021/understanding-the-life-sciences-sector-in-asia-pacific.

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NOTE TO REPORTERS AND EDITORS:

About the survey

The report presents insights gained from market participants through a survey of 75 ULI Asia Pacific members, two round table discussions, and a series of telephone interviews with 19 industry experts, all held in August and September 2021. An extensive literature review, including reports from government, academia, real estate advisers, professional services businesses, media, and websites has also contributed to the knowledge base. More than 130 transactions between 2015 and 2021 were analysed to reveal patterns concerning the origins of and destinations for capital.

About the Urban Land Institute
The Urban Land Institute is a nonprofit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the Institute has more than 45,000 members worldwide representing all aspects of land use and development disciplines. For more information on ULI, please visit uli.org or follow us on Twitter, Facebook, LinkedIn and Instagram. ULI has more than 2,600 members in the Asia Pacific region. For more information on ULI Asia Pacific, visit asia.uli.org or follow us on Facebook, Instagram, LinkedIn and Twitter.