Property Australia

A lesson in life sciences

Karen Jamal Karen Jamal August 24, 2021

Australia’s life sciences sector is forecast to double over the next decade to $24 billion, says CBRE’s Sass J Baleh.

 

Three key takeaways:

  • A new report from CBRE predicts that key drivers – including an ageing population, government expenditure and world-class research institutions – will put Australia on the life sciences map
  • An innovative healthcare system, skilled workers and quality medical research infrastructure also makes Australia an appealing life sciences destination
  • Report author Sass J Baleh says a predicted 1% uplift in the sector’s investible universe, from 3% to 4%, would increase its value from $13 billion to $24 billion by 2031.

 

250821 - Story 2 - Sass J BalehThe life science industry – which encompasses pharmaceutical, biotechnology, medical equipment, food science and healthcare – is a big opportunity for commercial property investors.

According to CBRE, Australia currently has around 20 established and active life science precincts, with 15 either emerging or planned.

Baleh, CBRE’s head of research for industrial and logistics, says the COVID-19 pandemic has expedited investment in life sciences, with the federal government looking to reduce Australia’s reliance on global imports.

250821 - Story 2 - Life sciences graph 1

Global pharmaceutical companies are also expanding their production capabilities in Australia and Australia’s mature and skilled economy is already a well-established hub for the biomedical industry.

Government spending on health and aged care will increase by seven per cent over the next 40 years, she says.

And business incentives for research and development will also drive investment in life sciences. Baleh points to two examples: the Australian Government’s $2 billion modern manufacturing strategy, and the $800 million manufacturing collaboration stream, which will accelerate the expansion of occupiers.

So how can Australia’s property industry take advantage of this boom?

“We expect that assets will come onto the market as pharmaceutical companies start to recycle capital for critical R&D,” says CBRE’s Chris O’Brien, executive director for industrial and logistics capital markets.

250821 - Story 2 - Life sciences graph 2

Although these assets are often hotly contested multi-use sites with high underlying land value.

Recent transactions include Charter Hall’s flagship Australian logistics fund, which acquired GlaxoSmithKline’s life sciences campus in Melbourne for $106m in a sale and leaseback deal in May.

In the same month Dexus’ unlisted healthcare real estate fund snapped up two life sciences buildings in Melbourne’s Parkville biomedical precinct for just under $140 million.

O’Brien suggests value-added investors consider purchasing older light industrial properties for conversion into laboratories or cold storage – although these conversions could lack the technological sophistication of purpose-built facilities, he warns.

“Given the critical nature of the facilities, forming partnerships with local authorities is another potential entry route into the market.”

While life science office and industrial transactions reached a record high in 2020, it’s still early days. CBRE’s report finds life science transactions represented just two per cent of industrial and logistics total sales over the last four years, and six per cent of office sales.

Download CBRE’s report: A new era of growth in life sciences.

Tags: COMMERCIAL