Life science real estate investment booming

Property leasing demand from life science companies continued to rise in Shanghai over the past year amid accelerated development of the biopharmaceutical industry.

And long-term investment opportunities are also looking promising, according to research released on Tuesday by international property consultancy JLL.

In 2021, leasing demand from the life science industry accounted for 26 percent of total demand in Shanghai, compared with 13 percent in 2020, JLL said.

"Innovation-led growth has driven interest and investment in the life science sector, fueling competition in Shanghai," said Anny Zhang, managing director for JLL East China and head of office leasing advisory for JLL China.

"The life science property sector, as a host for R&D, offices, and other business activities, will become increasingly attractive to investors," Zhang said.

Shanghai's biopharmaceutical market, which was worth over 600 billion yuan (US$91.7 billion) in 2020, aims to expand to 1 trillion yuan by the end of 2025, according to the city's 14th Five-Year Plan.

The city has also set a target to establish itself a world-class biopharmaceutical cluster by then.

Accelerated development of the industry is mainly driven by strong market demand, government policy, better talent acquisition strategies, and sustained capital inflows, JLL said.

The Zhangjiang submarket saw the most active life science leasing among local business parks, recording both expansion demand and new setups from companies over the past two years.

The Zhoukang, Pujiang, and Lingang Blue Bay submarkets are also emerging as popular locations for life science firms, each benefiting from positioning, government support, and other factors.

About 1.6 million square meters of life science properties are expected to enter the market in the next three years.

But that still means the market is rather tight due to the robust overall appetite, according to JLL's forecast.

"Strong demand from life science companies and the scarcity of vacant space has led to a steady increase in rents for life science R&D properties," said Stephen Yu, head of Shanghai business park services of JLL office leasing advisory.

"Vacancy rates for these properties in Shanghai will remain below 5 percent over the next three years, and the rent level of R&D properties will continue to rise steadily."

The sector's positive outlook and robust leasing momentum has boosted sentiment among institutional investors in life science real estate as an alternative investment with 90 percent of the respondents surveyed by JLL saying they are examining opportunities in this area, while 11 percent have already invested.