By 2021, 26 percent of office space rented in the Shanghai market came from science businesses, doubling the figure of 13 percent in 2020, according to a new report by JLL.
The study is the result of a survey of Shanghai Life Science Property: Primed for Growth, 61 life sciences companies and 19 life sciences real estate investment institutions, and provides a comprehensive analysis of its impact on growing industry and office use. in the city.
“The growth driven by innovation has boosted interest and investment in the life sciences sector, and boosted competition among Shanghai companies,” said Anny Zhang, JLL East China Managing Director and JLL Chief of China Leasing Office. “As a host of life sciences real estate, R&D, offices and other business activities, it will become increasingly attractive to investors.”
The growth of this innovation industry continues to designate China’s biopharmaceutical sector as a strategic industry at the national level, and regulatory reform is already promoting faster development and faster acceptance. In Shanghai, local authorities have set a goal to create a global biopharmaceutical cluster by 2025.
Official estimates put the Shanghai biopharmaceutical market at more than RMB 600 billion in 2020, and the city is looking to grow the market by RMB 1 trillion by the end of 2025. The report states that there is a strong market demand for health services and technologies. the strength behind the growth of the industry. Other factors that drive growth are:
Policy support and system reforms. Strong government support for sector reform and innovation will reshape the market position of the biopharmaceutical industry and promote a paradigm shift in the industry.
Recruitment of foreign talent and return of foreign Chinese. The Chinese government has implemented a series of policies to attract Chinese and foreign talent, and companies are offering valuable research opportunities and other incentives to improve their competitiveness in the global talent market.
Continuous capital investment to support development. Over the last decade, private capital and venture capital investments in life sciences companies have grown significantly. The average annual investment in life sciences has almost doubled in the 2018-21 period than in the previous four years.
“Looking ahead, Shanghai and China’s life sciences industry is expected to make further progress, supported by strong market demand, supportive government policies, better talent acquisition strategies and sustainable capital flows,” said Chinese Research Chief Daniel Yao JLL.
To continue the high growth of rents
The lease demand for life sciences companies in Shanghai has continued to expand in recent years, with the sector becoming the second largest source of demand in the city’s basic business parks in 2021. JLL statistics show that the demand for life sciences companies has risen by 13 percent. all industries by 2020 to 26 per cent by 2021.
The Zhangjiang submarket saw the most active life sciences rental activity among Shanghai’s business parks in the past two years, registering expansion demand and new business configurations. In addition, Zhoukang, Pujiang and Lingang Blue Bay submarkets are becoming popular places for life science companies.
In the next three years, 1.6 million square meters (17.2 million square feet) of life sciences properties are expected to enter the Shanghai market. Although the expected supply is high, most of these projects have already been rented or customized by life sciences companies. Overall, the market has achieved an average lease rate of 70 percent. In the short term, the ownership of R&D offices will be scarce and space for rent will be limited.
“Strong demand from life sciences companies and the lack of vacant space have led to a steady increase in the rental level of life science R&D properties,” said Stephen Yu, head of JLL’s office office leasing advisory group in Shanghai’s business park services. “The vacancy rates for these Shanghai homes will remain below 5 percent for the next three years, and the level of real estate rental R&D will continue to rise steadily.”
Consider Institutional Investors
Life sciences real estate has received increasing attention from institutional investors as an alternative investment asset. A survey of real estate investors by JLL showed that 90 per cent of those surveyed were looking at real estate science life options, and 11 per cent had already invested in the sector.
“The city will need to focus on the growth of high-volume, multi-functional concentrations of life sciences activity,” said Sun Ling, JLL, head of East China’s capital markets.
In addition to acting independently, investors are exploring a number of potential partnerships, including with life sciences companies, PE / VC companies in the life sciences industry, governments, and other domestic and foreign funds. These partnerships can improve outcomes for investors and life sciences occupants, resulting in larger-scale concentrations of life sciences activities and equipment that JLL calls “biocluster”.
As Shanghai progresses in building global life sciences innovation hubs, JLL hopes that independent development of mixed-use life sciences and larger-scale bioclusters will attract tenants from different phases of the business, and significantly increase “corporate cohesion”.
This protected feature is provided by JLL. The full report can be downloaded here.