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Chris Boyce
By Chris Boyce
Topics: Life Sciences
Topics: Life Sciences

Life Science Buildings: Key Cost Drivers

As an industry of increasing strategic importance to the UK economy, the life sciences sector is reportedly poised for exponential growth. With the pandemic acting as a catalyst, institutions appear to be piling into the sector and with strong forecast capital investment growth, we expect to see an expansion in the number of companies needing laboratory, office and ancillary space to support their business activities.

Due to their high energy requirements (along with their inherent scientific nature that perhaps makes them more aware of energy consumption), life sciences companies place a premium on high-performing, energy efficient buildings. They also prefer to be located close to well established knowledge quarters (eg the ‘Oxford-Cambridge Innovation Arc’) but finding highly optimised and efficient low carbon buildings in these areas is currently challenging. In fact it was recently reported that there is no laboratory space left in Cambridge. The pandemic has provoked a sharp rise in demand for life sciences facilities which has created an acute shortage of supply in the region. Savills reported that all of the 29,438 sq ft of existing lab space in Cambridge as well as an additional 134,400 sq ft of refurbished lab space in the development pipeline, is under offer.[1]

A lack of speculative lab development in previous years is partly to blame for the current situation but the pandemic has also played a part, prompting greater investor appetite in the healthcare and life sciences sectors. The Oxford-Cambridge Arc’s knowledge-based economy is attracting record levels of funding and has been for consecutive years now. As incumbents and start-ups alike compete for limited (and in some regions, non-existent) lab space, more and more commercial office developers are exploring the possibility of building flexible sites and buildings that can be adapted to accommodate the burgeoning life sciences and lab sector companies.


Key Cost Drivers

Following on from our recent article on the UK Life Sciences sector, G&T’s cost consultants have considered the order of cost uplifts involved in order to future-proof a commercial office development to allow for future flexibility in adapting or fitting it out as life sciences building.

The table below summarises the key cost drivers behind developing a speculative life science building from the starting point of a London city centre, shell, core and Cat A development. This hypothetical model assumes a building of circa 100,000 sq ft, including basement.

2108 Life Sciences Key Cost Drivers Graphs Summary Of Key Cost Drivers
2108 Life Sciences Key Cost Drivers Graphs Key Cost Drivers Developing A Speculative Life Sciences Building

In the model above, the cost uplift to future-proof a city centre shell, core and Cat A office development (with a base cost of £350/sq ft) to allow for future flexibility in adapting or fitting it out as life sciences building is around 10-14%. On a commercial office development with a base cost of £450/sq ft, the cost uplift range drops to 8-11%.

Notes/ Assumptions

(i) The model above is based on an equivalent BCO Category A fit-out. No allowance has been made for any tenant fit-out (including equipment).

(ii) All prices are at 2Q21 price levels – Central London.

(iii) No allowance is made for any specialist gas installation. An area within the basement to be set aside for tenant gas storage.

(iv) No secondary/specialist laboroatory drainage will be required.

(v) All electric building.

(vi) Demolition and site clearance is excluded.


Further Considerations

Below are some further things to consider when planning speculative life science developments:

  • Even developments with a high proportion of wet or specialist lab space require office accommodation, providing desk space for writing up and business support functions. Integrating office and laboratory functions in the same building requires careful planning.
  • The range of functions that fall under the heading of “Life Sciences” is broad - from dry laboratories similar to office accommodation but with increased power and data storage requirements, through to specialist laboratories requiring close environmental and vibration control and large air volume changes. The specific use will drive not only the cost of the base build but also the tenant fit-out.
  • Multi v single tenant: The letting strategy of the building will directly affect the design and cost of the base building. Buildings let to multiple tenants may require infrastructure to be installed on Day 1, minimising disruption to future occupants. Buildings designed for a specific end user or single tenant may deliver a more efficient nett:gross ratio. For example, locating central tenant plant in basement areas rather than on floorplates.
  • Will the whole development be designed for life science use from Day 1 or will future adaptations be required?
  • Attracting life science tenants: Consideration needs to be given to the location and proximity of the building to similar activities as life sciences companies are becoming increasingly cluster-oriented. Being local to universities and existing urban settings helps foster a sense of community, promotes innovation and helps attract talent. For example, London’s Knowledge Quarter in and around King’s Cross, London.
  • Although the costs allow for on floor horizontal MEP installation and the landlord’s fit out, this may not be installed as part of a base build - especially as future on floor use may require a very specific fit-out specification.
  • Vibration Control: The performance of the structural grid to meet specific vibration control criteria is an important consideration. Creating zones adjacent to cores for the future location of vibration-sensitive equipment will help to manage the cost of this enhancement.

The life sciences space crisis demonstrates the importance of adaptability in real estate. While laboratory space can be highly specialised, considering flexible configurations at the outset of the structural design means that spaces can be adapted quickly to accommodate future tenant/user needs or technological advances. Being able to easily convert commercial office buildings to accommodate a wider range of uses and tenant types should provide the best opportunities to respond swiftly to changing markets and protect returns on investment for years to come.

If you would like to learn more about how G&T can help convert or future-proof your commercial office project for potential life sciences use in the future - please contact your usual partner at G&T.