Real Estate Holds Out Hope That Merck And AstraZeneca Pullbacks Are Just A Blip
The UK’s life sciences real estate sector has seen this movie before.
Global pharmaceutical giants pull back from headquarters and research commitments. There is much gnashing of teeth. But the sector carries on growing, if a little slower than had previously been hoped.
“This is not the first time this has happened to the UK economy,” JLL Head of Life Sciences Property and Asset Management Suketu Shah told the audience at Bisnow’s UK Life Sciences and Healthcare Summit, held at King’s Cross Group's The Jellicoe building and attended by more than 200 people.
Shah was referencing recent decisions by Merck to pull out of leasing a 185K SF lab and office building in King’s Cross and the announcement the next day that AstraZeneca had paused a £200M expansion of its Cambridge HQ. The two decisions have dominated economic headlines in the UK and been seen as a major blow for the UK life sciences sector.
He said AstraZeneca had closed a research facility at Charnwood in Leicestershire in 2010 and that Merck had closed a facility in Edinburgh in 2012. Almost 1,500 jobs were lost across the two facilities, but both have now been taken on by new owners, and with strategic government support, they are thriving sites occupied by multiple companies.
“It's just a matter of time, and people need to have a long-term vision,” Shah said.
He pointed to the fact that the Charnwood site became an enterprise zone, where occupiers paid reduced business rates and were given capital grants to buy new equipment, as an intervention the government had made to turn the sites around.
Speakers at the event put the decisions by Merck and AstraZeneca in the context of the wider strategy of the two companies, and the dance between the UK, U.S. and the global pharmaceuticals industry.
The two announcements came the week before the visit of U.S. President Donald Trump to the UK, and Trump has been attempting to coerce U.S. companies to undertake more of their research and production at home.
“I think there was a lot of Trump whispering going on the week before the state visit,” Barts Life Sciences Managing Director Grant Bourhill said.
At the same time, pharma companies have been lobbying the government to reopen the settlement between the NHS and manufacturers over how much the UK health service pays for drugs. Pulling back on potential investment in the UK is a way of exerting leverage, panellists said.
“There's a story behind each of those headlines,” Railpen strategic adviser Emma Goodford said. “And you know, certainly I'm not convinced the AstraZeneca one is true — there's a commercial reason why some of these headlines are coming out.”
Bourhill also pointed to the fact that both AstraZeneca and Merck are cutting research budgets in other jurisdictions, under pressure as they are to improve flagging share prices.
All of that is not to say that UK real estate leaders are blasé about the challenges facing the country’s life sciences sector. Britain has great universities but has historically underperformed the U.S. when it comes to turning scientific discovery into commercially successful companies.
“This feels like a kind of key inflection point for UK plc,” said Antara Woodring, Oxford Properties vice president of life sciences for Europe.
A country becoming a successful ecosystem for life sciences — which in turn helps the real estate sector — requires a combination of successful academic institutions, healthcare institutions, capital markets and real estate.
“There needs to be a concerted, urgent action to address each of those things and an understanding of how budgets and policies have implications on those things and to take action to mitigate any kind of constraints,” she said.
