Venture capitalists raise over $ 100 billion to target life sciences
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Venture capitalists are raising record amounts to invest in life science companies, to gain exposure to a sector that has been in the spotlight during the coronavirus pandemic.
More money has been accumulated to target new and established life science companies this year to date than in all of 2020, itself a banner year for investment. This has skyrocketed the values of life science labs, offices and campuses.
Overall, $ 103 billion in venture capital has been raised this year to date, according to real estate agency JLL. This compares to $ 96 billion raised last year and $ 63 billion in 2019.
The funds raised will drive the industry’s growth, said Chris Walters, who heads JLL’s life sciences practice in the UK. “The growth of venture capital equals the growth of the business, which equates to a real estate need,” he said.
The majority of venture capital investment is focused on the United States, with around $ 56 billion raised in the year to date. That’s more than triple the $ 16 billion raised in China, the world’s second-largest market, according to JLL.
A total of $ 12.3 billion has been raised in Europe, where the UK is by far the main target for investors.
A summer frenzy saw venture capitalists raise £ 1.9bn between June and August alone to invest in UK companies, bringing the total funds raised during the year to £ 4.25bn sterling compared to £ 2.8 billion in 2020.
The UK government has also supported the sector, increasing its commitment to research and development spending from £ 15bn by 2027 to £ 22bn.
The so-called Golden Triangle between London, Oxford and Cambridge has particularly attracted investors. Of the seven fundraisers of over £ 50million undertaken by UK-based life science firms this year – including a £ 425million fundraiser by the medical technology firm CMR Surgical in June – all but one were in the area.
The weight of the investment has in turn increased the value of specialized laboratories and campuses. Oxford University’s Magdalen College is selling a stake in Oxford Science Park, hoping to receive nearly seven times what it paid five years ago.
Tom Mellows, who leads the life sciences occupant services team at the Savills real estate agency, said “there is definitely a lack of space.”
“In a place like Cambridge, which is probably the most mature market for lab space, the land is limited and the planning system is time consuming. The last lab spaces built in Cambridge were all leased before they were completed, ”he said.
As homeowners and investors clamor to develop or buy life science properties, some risk paying too much for sites, he warned. “It’s absolutely going to happen. Many UK owners are inexperienced in this industry.
With limited lab space available in the triangle and rapidly rising prices, companies could look elsewhere, Walters said. Manchester and Birmingham have already established life sciences markets and are likely to grow, he said.
In addition to venture capitalists, a number of large institutional investors are entering the industry.
Axa IM Alts, a division of French fund group Axa Investment Managers, announced in July that it would spend nearly € 2 billion on specialist laboratories and offices in Europe, and private equity firms Blackstone and Brookfield have recently increased their bets on the sector.