Increased government funding and Australia’s ageing population, alongside strong market fundamentals, are driving interest in life science real estate, but opportunities are scarce.
New research from CBRE indicates that the growth of life sciences hubs in the Asia Pacific region is being fuelled by several factors, including an aging population with a greater focus on health, strong demand for occupancy, and significant interest from investors.
In recent years, there has been significant growth in the size of life sciences clusters in the Asia Pacific region, with the total leasable area now exceeding 9.2 million sqm. Despite economic challenges, these clusters have shown resilience in terms of rent performance, thanks to strong demand from occupiers.
Director of CBRE’s Director of Australian Healthcare & Social Infrastructure team Sandro Peluso said this trend is driving investor interest in life sciences assets in Australia, but opportunities are limited.
“One recent transaction involved BRC Capital acquiring a major site within Melbourne’s Arden urban renewal precinct, with the potential to create a $600 million mixed-use health hub in what is tipped to be Melbourne next major health and biomedical hub,” Mr Peluso said.
“Further activity is anticipated this year, with investors attracted to the low vacancy rates and long leases terms associated with life sciences assets, which typically average 10-15 years+ due to the capital required to establish new facilities. This compares to average lease expiries of 5-7 years on core commercial real estate investment assets.”
Macquarie Park in Sydney and Parkville in Melbourne are examples of life sciences parks.
According to Mr Peluso, developers and investors are also drawn to the life sciences sector due to its robust underlying fundamentals, such as growing government funding and Australia’s aging population. It is projected that the 85 and above age group will see a growth of 140 per cent by 2041.
Several life sciences hubs have been established across the Asia Pacific region, including in Melbourne, Sydney, Shanghai, Beijing, and Tokyo. Additionally, major new developments are expected to take place in locations such as Shanghai Lingang Life Sciences Park, Hong Kong Lok Ma Chau Loop, and Labzone Bangalore Life Sciences Park in the coming years.
Investment funds have raised around US$18 billion in the past five years to invest in this sector. However, a shortage of available assets for sale has limited the investment volume to just US$717 million in 2022, representing less than one per cent of the Asia Pacific’s total commercial real estate investment volume.