Nov 13th 2021
OXFORD NANOPORE’S MinION is a tiny but powerful device. When a hotel worker in Sydney tested positive for covid-19 in March last year, the portable DNA sequencer traced the infection to a flight attendant for an American airline, avoiding a general lockdown. The success of biotech firms—another celebrity is BioNTech, of Covid-19 vaccine fame—is sucking capital into life sciences. When such companies expand, they do so not with offices or shops but by means of white-walled, shiny-surfaced scientific laboratories.
Commercial-property investors have long banked on offices, retail and industrial buildings. Less conventional assets like mobile-phone towers were the preserve of specialists. Now the big guns of real estate are competing over them too. Thus laboratory space has become commercial real-estate’s hottest property, along with other facilities that power the digital economy. Data centres and infrastructure that connect smartphones are booming.
The investors’ motivation is clear. The pandemic convulsed commercial-property prices globally. American retailers closed nearly 15,000 shops in 2020. By mid-October, with people attached to remote work, offices were only a third full. The risk profile of some conventional property assets has deteriorated sharply.
In contrast, demand for assets like labs and data centres has never been stronger—a trend visible before the coronavirus began to spread. As rent collections for shops and restaurants plummeted last year, data traffic from virtual meetings and online shopping exploded. Companies that use the underlying data centres and mobile towers are demanding more of them. These digital-economy winners look as safe as houses.
The shift is reflected in the changing make-up of America’s ten largest real-estate investment trusts (REITS). A decade ago the most valuable such vehicle was Simon Property Group, the country’s biggest mall owner. Today it is American Tower, a fast-expanding owner of tens of thousands of phone masts around the world. Five of the top ten REITS currently manage either data centres or mobile towers.
The loudest buzz currently surrounds life-sciences and lab space. Investors are flooding the health-care sector with capital. Drug makers, medical-equipment manufacturers and other life-sciences firms have raised a record $103bn in venture capital so far this year, up from $63bn in 2019, according to JLL, a property consultancy. A generous slice of capital is going into property. JLL estimates that up to $87bn is now being directed towards life-sciences real estate worldwide. That is equivalent to a third of all global spending on commercial property in the second quarter of this year.
Landmark deals are cropping up frequently. In October GIC, Singapore’…….