Life Science – a new asset class on the rise
Life science is still a new type of real estate for European investors. Most market participants have not yet developed their own idea of what this type of use involves. The life science industry combines a wide variety of scientific sub-disciplines, all of which relate to the topics of life and health. The scientific discipline of life science is the industry for improving life. The largest areas of research and development include biotechnology, the pharmaceutical industry, digital health and medical technology, in addition to molecular biology and environmental sciences. Since these disciplines deal with living organisms in the context of their research and product development, there are also increased demands on the personnel, as well as on the building structures, such as laboratory or production areas at these facilities.
In view of the increased life expectancy referred to at the beginning, increasing health awareness and an increase in diseases of civilization in an aging population, the need for life science real estate speaks for itself. The higher resilience against short-term fluctuations in demand means that the market for life science properties is also increasingly becoming the focus of real estate investors. The inclusion of life science real estate in your own portfolio can, therefore, lead to a higher return, while increasing diversification at the same time. The trend towards the home office and digitalization due to the COVID-19 pandemic is not fully affecting the life science industry, as many activities can only be carried out in the laboratory. However, definitive delimitation is still difficult, since in this case corporate real estate (office properties, mixed-use buildings), innovation and health campuses, pharmaceutical logistics (warehouses, physical and mail-order pharmacies), and light industrial real estate can be classified.
European life science real estate – the new core?
A look at the various market data shows an increasing investor-side interest in the "life science" asset class in Europe.
Since 2010 total expenditure on pharmaceutical research and development has been steadily increasing at global, European and national levels. In 2022, compared to 2010, expenditures of around 236 billion euros (+86.1%) are expected at global level, around 42.7 billion euros (+53.2%) at European level and around 7.4 billion euros (+32.6%) at a national level. This shows that steady growth in pharmaceutical research and development is also expected in the coming years (2028: approx. 283 billion euros in Europe)[1].
The European life science market has increasingly become the focus of international investors in recent years. In particular, compared to US properties, corresponding properties can be purchased around 40% more cheaply. Similarly, the cost of running a biotech company in Europe is about 50% lower than in the US. In addition, the good infrastructural conditions, a uniform and secure legal system, as well as the relatively low wage costs for workers in the European life science sector, show up in international comparison.