Melbourne takes leading position in APAC life sciences sector amid rapid growth in occupier and investor demand

Melbourne has been ranked as one of the top five life sciences hubs in Asia Pacific according to a new CBRE Research report exploring the growing occupier and investor demand for specialised life sciences real estate.

A New Era of Life Sciences Growth: Opportunities for Occupiers and Investors focuses on key trends, demand drivers, corporate real estate strategies and investment opportunities as macrotrends propel the industry into a fresh phase of expansion.

The life sciences industry, which includes the pharmaceutical, biotechnology, medical equipment, food science and healthcare sectors, is forecast to have enormous growth potential in Asia Pacific owing to the region’s large – and in some markets, ageing – population, low health expenditure per capita (representing circa 6% of Asia Pacific GDP versus 17% in the U.S.), and a rise in pharmaceutical research & development (R&D).

>>> Click here to read the full report

This potential is already being evidenced, with organic expansion and flight-to-quality relocations underpinning 17.4% y-o-y growth in the volume of life sciences office leasing in Asia Pacific in 2020, compared to a 25% decline in the overall Asia Pacific leasing market.

CBRE’s report also ranks the competitiveness of the region’s top life sciences hubs and points to a rapid rise in investor interest in the sector, underpinned by a strengthening focus on R&D since the onset of the COVID-19 pandemic.

This is expected to underpin a growing number of sale-and-leaseback transactions, public-private sector partnerships to drive development opportunities and a repositioning of ageing light industrial facilities into laboratories or cold storage use.   

The report uses 12 criteria based on four major categories – manufacturing, R&D, pharmaceutical logistics and sales – to rank the competitiveness of major Asia Pacific life sciences markets.

This positions Melbourne among the overall top 5 Asia Pacific hubs due to its advanced and innovative manufacturing of pharmaceutical and medical technology products, strong logistics networks and university-backed research capabilities, with the University of Melbourne ranked second globally for university-related biomedical research.

The city also attracts 40% of national medical funding and is a base for 41% of all Australian life sciences companies.

In Greater China, Shanghai and Beijing stand out owing to their advanced manufacturing and R&D capabilities and large domestic market. Tokyo and Singapore also rank among the top life sciences markets, due to their sophisticated infrastructure, talent pool and protection of intellectual property.

Figure 1: Asia Pacific life science industry market competitiveness

Source: CBRE Research, June 2021

“Australia is on track to becoming a world leading life sciences hub, driven by technological advancements in biotechnology and support from the Federal Government, which has identified the life sciences sector as a strategy priority, particularly in a post COVID world,” said CBRE’s Pacific Head of Capital Markets, Mark Coster.

“Australia’s world class healthcare system and an established network of highly regarded universities and research institutions have ensured the country’s appeal to global life sciences companies, with established clusters in Sydney’s Macquarie Park, Parkville in Victoria and expanding hubs in Brisbane, Perth, Adelaide and the Gold Coast. This is underpinning investor interest in life sciences real estate, as highlighted by Sigma Pharmaceuticals 2020 sale of cold storage facilities in Brisbane and Sydney to LOGOS Property for $172 million and Charter Hall’s recent $106 million acquisition of GlaxoSmithKline's life sciences campus at Boronia in Melbourne's east.”

While capital markets activity across Asia Pacific has remained relatively limited, there has been heightened competition for available assets since the start of the pandemic and rising expectations that some properties previously developed under public-private-partnerships will be made available for sale.  

“While life sciences real estate is at a nascent stage of development as an investible asset class, there is significant potential – particularly in the Asia Pacific region, where life sciences transactions account for less than 1% of annual investment activity, compared to circa 4% of deal activity globally,” said Dr Henry Chin, Global Head of Investor Thought Leadership and Head of Research, APAC, for CBRE

“The obvious entry route is via sale and leasebacks as multinational pharmaceutical companies recycle capital for R&D activities or offload non-essential assets following mergers and acquisitions. However, we expect other opportunities will include converting older industrial properties into laboratories or cold storage facilities as well the construction of modern life science facilities under public-private partnership (PPP) frameworks across the region,” Dr Chin added.

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