Why are landlords converting offices to laboratory space?
The pandemic has unquestionably changed the way we work and contributed to the increase in redundant office space. Conversely, the life sciences sector has seen very rapid growth. 2020 saw £19.9 billion of life science-related capital raised by UK-based companies, which was 23% higher than 2019[1] — and London is riding the crest of this wave.
With demand for suitable laboratory space outstripping supply, London office landlords are, unsurprisingly, welcoming the opportunity this brings to the issue of an oversupply of office space. In the United States more than 20% of laboratory spaces have been converted from offices[2] and rents in the last five years have risen by 60% for the former compared to 15 – 60% for the latter2.
What makes offices well-suited for conversion to laboratory space?
Speed and Risk
The repurposing of existing buildings, including office space, is generally felt to be a faster route to bring real estate to market than building from the ground up, which is why this is being favoured at the current time. Conversion of existing premises often involves less capital risk for investors too.
Location
As the war for talent intensifies, life sciences companies are keen to locate in clusters alongside not only academia, but manufacturing, laboratory space and start-up companies to access the talent base in the UK and tempt those overseas to relocate to the UK. Sitting at the heart of the Cambridge-London-Oxford Golden Triangle, London is home to world-renowned academia and research – as well as the NHS – and is able to attract individuals and companies alike. Its industry is equally as strong, having the largest concentration of bioscience companies in Europe (3,700).
Conversion considerations
While office space is seen as a viable envelope to be redeveloped as laboratory/R&D space, significant alterations will be needed. Life sciences occupiers will require:
- increased primary electricity supply – laboratories often need up to twice the electricity capacity as offices;
- backup power supply – projects need guaranteed continuous power;
- improved water supply infrastructure – mainly because of the materials in use and their associated chemical safety requirements;
- greater floor-to-floor height – as all duct and plumbing lines and wiring needs to be kept behind dropped ceilings to ensure the sterile nature of the workspace, a 16 – 17 foot floor-to-floor height is often needed;
- increased structural load bearings – to accommodate industrial strength laboratory equipment;
- greater fire protection and sprinklers – to mitigate increased fire risk and to safeguard flammable items;
- increased HVAC capability – to meet the minimum exhaust ventilation rates for laboratories under building regulations and ISO8 cleanroom requirements; and
- better insulation – reflecting the importance of temperature control in sensitive laboratory testing conditions.
While upgrade works are expensive, they can often be cheaper than new development – especially in central London.
A more flexible planning regime
Another important factor is the changes to the Town and Country Planning (Use Classes) Order 1987 (as amended) in September 2020. Offices have moved from former Use Class B1(a) to Class E(g)(i) and research and development has moved from former Use Class B1(b) to Class E(g)(ii). These changes allow change of use from office space to research and development space without the need for planning permission. This will further speed up the route to repurpose office space to laboratories.
Low Carbon Benefit
The case for repurposing is strengthened further through offering a low carbon alternative to building new premises – something that executive boards and investors are now increasingly mindful of in relation to their businesses.
Repurposing offices in the capital to create laboratories makes sound, very persuasive business sense from a financial, timing and environmental perspective – something which will not be lost on landlords, research and development companies and investors.
For more information on how we can help you with your life sciences / office requirements etc., please contact helen.emmerson@uk.gowlingwlg.com.
[1] ‘Life Sciences: Trends & Outlook’ – Savills – January 2021
[2] ‘A Wild 15 Months’: Pandemic Spurs Conversion of Offices to Labs — New York Times – 27th July 2021