The Subplot | Life sciences, Leeds towers, Great Northern hopes

Good Thursday morning,

THIS WEEK

• Life Sciences Opportunity Nots: Why you shouldn’t get too comfy about science property in the North
• Elevator pitch: your rundown of what is going up, and what is heading down

LIFE SCIENCES OPPORTUNITY NOTS

A bad thing just happened

AstraZeneca confirms it will abandon its plans for a Macclesfield factory and head to Dublin. It isn’t a surprise, but it is a big blow – and an almighty wake-up call. But is anyone listening?

Since September 2021 it has been clear AstraZeneca might take its future active pharmaceutical ingredient facility from Macclesfield to Dublin. The move has now been confirmed. It takes a £332m investment in state-of-the-art life sciences away from the North. Ireland’s low corporate tax rates were, of course, central to AstraZeneca’s thinking. But the firm also took a swipe at the UK life sciences sector, which is great at the “discovery” end of the business, and less good at supporting mature businesses into serous production. It’s not as if this is the first time it’s happened in the North: Daresbury is available for development because the Wellcome Trust decided to go to Oxford.

A good vibe

Let’s get the comforting feel-good stuff on the table first. The North – particularly the North West – is a real life sciences player. Developers can smell a chance, and both local and international players are on the trail. Kadans Science Partner, the Dutch life sciences development giant, is eyeing up Manchester’s Oxford Road corridor for a 230,000 sq ft campus. Kadans didn’t have to head north from its southern comfort zone, and they did, so that’s seriously good news.

Northern star

Bruntwood SciTech is advancing 200,000 sq ft plans for Alderley Park, half of it lab space. Results, published last week, show a nice solid little business: net asset value grew by more than a third to £321m (2021: £235m) as the value of its portfolio rose substantially, hitting £858m (2021: £647m). The firm made a £91m capital investment in new sites and schemes and refreshing older properties, very welcome indeed.

But so tiny

Kadans, Bruntwood, it’s all super stuff. But remember the scale: this is about tiny numbers. Kadans plans three times as much on just one central London site as it does in Manchester. Bruntwood SciTech is a Northern star, but its £91m is modest compared to the £2.45bn invested in life sciences property in the Golden Triangle in 2022. Behind these numbers lies a depressing – and deadly – shortage of supply, and sky-high rents.

Nasty numbers

Accurate data is a problem – this is such a niche market that it’s hard to know what’s going on. The Centre for Policy Studies reckons Cambridge’s supply and demand picture is transparent, and thus a good measure of where things stand. CPS says of the city: “..average annual laboratory demand since 2022 for [Oxford and Cambridge] has been estimated 335,000 sq ft per year. Despite this, average annual availability since 2017 has been less than 150,000 sq ft, meaning that on average, almost 200,000 sq ft of demand has gone unmet each year.”

Hell, hand cart, etc.

It’s probably worse than that, as the latest Cushman & Wakefield data seems to show. The firm predicts a crashing shortage of lab space in the Golden Triangle (Cambridge, Oxford, and London) which won’t meet demand until 2025/2026, if then. What happens in the meantime is anyone’s guess. Take-up in the Golden Triangle was about 636,000 sq ft in 2022.

Nice prices

As a result rents are going through the roof. A London lab, fitted out, will cost £110/sq ft. Less glam space is still wildly pricey (£60/sq ft – £90/sq ft), to the extent that it is already choking off demand, says Cushman & Wakefield. Cambridge rents are easily double those in Munich or Amsterdam, says the CPS. Manchester rents are close to Munich levels.

Just do something

What to do? Last week the right-leaning CPS took a look at the related semiconductor sector, where problems are similar. It recommended against competing on tax advantages and big cash handouts – those ships have sailed – but to make the UK environment more supporting of lab development. This includes presumed consent within three miles of a university campus, tinkering with section 44 of the National Planning Policy Framework to standardise lab planning rules, and introducing permitted development rights in areas where scitech clusters could develop. It’s sensible stuff.

Fingers crossed

In the meantime, could the North benefit from the over-priced and under-supplied Golden Triangle? You’d have to be an optimist to think so. First, because the cost advantage has been there all along, and it hasn’t inspired any serious moves yet, rather the opposite. Second, remember the big picture – see AstraZeneca. Third, even if development in the North was going to start on a useful scale tomorrow morning, it would take 20 to 30 years to reach Golden Triangle levels of supply and occupation. To achieve even this would take successive governments with an unflinching commitment to the idea, and that’s not something wise people ought to bet on.

For now, Subplot has some evidence of its own. Attempts to talk to some of the big cheeses of UK lab development about the North’s supply-demand issues and real-time prospects got nowhere. One huge name confessed everyone was skiing; others just went silent, or didn’t respond in the first place. For the record, local responses were a lot better. OK, it’s half-term but if that reflects the sense of urgent priority in life sciences property, we’re all screwed.

ELEVATOR PITCH

Ding ding ding! Leeds tower developments are hitting the ‘up’ button, while a huge missed opportunity in Manchester may be about to turn into something thrilling.

Leeds towers

McLaren has submitted plans to develop a 463 ft tall build-to-rent tower in Wellington Street, Leeds. The 45-storey block is comfortably higher than the current Leeds’ record holder, 38-storey Altus House. If all goes well, it will anchor one end of a new innovation arc.

Leeds is a bit late to the regional skyscraper game, but promises to make a strong showing sometime soon. Olympian Homes has plans for a 43-storey edifice at Merrion Way: demolition and site clearance is underway. Local developer City Life has been promoting plans for a 33-storey tower at Whitehall Road, Holbeck. The company website suggests it is aiming for off-plan sales.

More Leeds proposals will follow and some of them will get built. Probably.

Wasted opportunities

Manchester’s Great Northern Warehouse has been on a long, long journey. The latest stage comes today as city planners decide on proposals to demolish the AMC cinema and replace it with three residential towers housing 747 apartments. The difficult-to-convert car park will be repurposed as 280,000 sq ft of offices in a project due to arrive by 2029.

Trilogy Property’s proposals could be a winner, something said regularly about revised plans for this tricky but tempting site. So before celebrating let’s wait to see work on site begin in June 2024.