Our focus on healthcare has rarely been so keen and the fortunes of commercial real estate occupied by life sciences industries is benefitting as a result. The sector that takes in all things pharmaceutical, biotech, healthcare, medical equipment and food science-related is estimated to double in value to $24 billion over the next decade, both occupiers and now investors to play equal roles in driving the expansion.
The optimistic growth forecast by CBRE comes after life-science property transactions reached new heights in 2020 despite the economic downturn. This was also on the back of record levels set in 2019 when $549 million worth of healthcare, medical centres and hospitals transacted, an increase of over 100% on transactions the year prior. Not surprisingly, 15 new life-science related precincts are being added to 20 existing projects in what will see billions pumped into the sector.
This growth heralds the federal government’s focus on fostering Australia’s capability in the pharmaceutical life sciences area given the general move away from reliance on global imports said CBRE’s Head of Industrial and Logistics Research Sass J Baleh. “Comparing Australia’s health systems to similar OECD countries such as Germany and Canada provides a good indicator of Australia’s direction of growth in this sector,” Ms Baleh said.
The findings will be a boon for those working on developing homegrown covid vaccines. As far as complex pharmaceutical manufacturing infrastructure is concerned, Australia is fairly limited outside of CSL Limited, currently Australia’s only onshore vaccine manufacturer. This has meant that mRNA technology has not been pursued in Australia largely due to the small scale and relative lack of local biotechnology infrastructure. In May however change was signalled when the federal government called for bids from biotech firms keen to manufacture mRNA vaccines onshore for the first time. Those to have bid included CSL Limited as well as Brisbane-based pharmaceutical manufacturer Luina Bio and Sunshine Coast drug developer and manufacturer Servatus.
Aiding projects such as these will be significant government spending across the health and aged care sectors meted out in a number of business incentives. According to CBRE’s report A New Era of Growth in Life Sciences these include the Modern Manufacturing Strategy, Manufacturing Collaboration Scheme, the Patent Box Scheme and the Medical Research Future Fund, as well as tax incentives for research and development. Of these, the $2 billion Modern Manufacturing Strategy has the potential to greatly accelerate the number of occupiers in the pharmaceutical sector said Ms Baleh.
“This investment in the critical goods industries aims to support manufacturers to scale up operations, become more competitive and improve supply chains,” Ms Baleh said.
“There is also funding support for influenza vaccine production and supply close to Melbourne Airport, and several proposed blueprint projects underway involving Pfizer, Boehringer Ingelheim and Illumina.”
Upcoming investments in the life sciences arena include:
NSW – Around $12 million is going into the foundation of Biobank, the southern hemisphere’s first and largest facility using robotic tech to store and process millions of biospecimens under research. Among the state’s major and emerging life science hubs are innovation and health precincts at Macquarie Park, Westmead, Randwick, Camperdown and Liverpool as well as UNSW Torch Innovation Precinct Knowledge Hub and Sydney Science Park. More than $3 billion is being spent over the next decade developing Westmead’s health precinct even further.
Victoria - $2 billion in the Breakthrough Victoria Fund for innovation and research, and $20 million in the Australian MedTech Manufacturing, the funds set to boost the production of vital medical equipment.
Queensland – The Sunshine State will see $650 million ploughed into research and development alongside a $4 million 10-year biomedical roadmap to position Queensland as a globally competitive APAC biomedical hub. Key to this will be the Gold Coast’s Health & Knowledge Precinct which will encompass the university and public hospitals as well as a new private hospital.
How investors and other commercial property stakeholders can benefit
Institutions have embraced life science real estate in the past decade. At the same time the increasing overlap of educational facilities with those providing healthcare has created a solid platform for investment in both health and life sciences real estate. For instance, a district rich in world class research facilities and other similarly impressive institutions has developed in and around the Parkville campus within the University of Melbourne, a precinct with several major hospitals.
A life science landlord could be anything from a large REIT to a real estate developer to an owner of a small building or older light industrial property who may be looking to convert their property into lab space or cold storage.
Chris O’Brien, CBRE’s executive director of capital markets Industrial & Logistics said that for investors in this market, the opportunities in coming years will be in sale and leaseback deals, conversions and partnerships. Given the amount of investment and number of precincts detailed above, forming partnerships with local authorities was “another potential entry route into the market” Mr O’Brien said.