Riding the biotech wave: A durable bet for real estate?
Biotechnology – using biological science and living systems to develop new products – is often associated with pharmaceuticals. In reality, its impact extends far beyond human healthcare.
8 minutes to read
Biotechnology – using biological science and living systems to develop new products – is often associated with pharmaceuticals. In reality, its impact extends far beyond human healthcare. Biotech innovations are quietly transforming agriculture, energy, materials, and even computing. From engineered crops and lab-grown meats to bio-based chemicals and renewable fuels, the use of biology as technology now permeates diverse industries. It is central to tackling some of the world's most critical challenges.
Structural tailwinds and challenges
The biotech sector will experience robust global growth underpinned by powerful structural tailwinds. According to McKinsey's, up to 60% of global physical inputs could use biological means, and 45% of the worldwide disease burden could be addressed via biotech, representing a $2–4 trillion annual economic impact by 2030–2040.
Several secular drivers give confidence that this growth trajectory has legs. Demographics are a key factor: an ageing, wealthier global population combined with a greater prevalence of so-called diseases of modernity, such as obesity and diabetes, is generating relentless demand for new therapies and agricultural productivity gains. One portfolio manager noted that the world is growing "older, richer and sicker," driving a strong secular growth story in biotechnological innovation. At the same time, converging technologies – from genomics and artificial intelligence to gene editing and robotics – are accelerating discovery and reducing development costs. The cost of sequencing a human gene has gone from around $3 billion in 2007 to a capability to do it for $100 today. The successful rollout of mRNA vaccines during the pandemic showcased how breakthrough biotech platforms can scale at record speed. Enormous public and private capital has since flowed into life sciences, buoyed by Environmental, Social and Governance (ESG) tailwinds as investors bet on biotech solutions for challenges like climate change and food security.
For all its promises, the growth path is not straightforward. Access to funding can be volatile, as evidenced by the drop in venture capital funding post-pandemic before signs of recovery in 2024 and Q1 2025 - though concentrated in a smaller number of deals. Furthermore, biotech's fundamental economics pose challenges. Developing a new drug, for example, is a long, expensive journey: the R&D process often takes a decade or more, and failure rates for new drug candidates run as high as 90%. Many young biotech’s burn cash for years before revenue, let alone profit, materialises. The industry's capital intensity and lengthy product cycles mean that returns, while potentially spectacular, are highly uncertain. Moreover, scaling a discovery from lab bench to market – navigating regulatory approval, manufacturing, and distribution – is a complex gauntlet that few startups manage to complete independently. These factors underscore why biotech booms tend to be punctuated by setbacks.
The UK's position as a biotech hub
The UK boasts several key strengths that position it as a leading global hub for biotech. It is home to world-renowned universities and is responsible for 29% of all European scientific journal publications[1]. In Q1 2025, the UK jumped to second place globally for life sciences and biotech VC funding, behind the US[2]. The NHS provides a unique clinical research environment complemented by the UK Biobank—a globally significant health data resource driving breakthroughs in genomics. Furthermore, a legally binding target to reach net zero will fuel investment in biotech focused on tackling climate change.
However, some challenges temper the UK's global position. One of the primary ones is that, unlike the vast US market, Britain's capital markets and venture funding pool for biotech companies are not as deep. It is also viewed as harder to list in the UK. This restricts the ability of biotech firms to scale up in the UK. The UK also has a scarcity of specialist investors, and a smaller base of experienced management talent compared to the tight-knit communities in Boston or San Francisco. Within the pharma and biopharma sector, industry leaders have voiced concerns over a scheme that capped NHS spending (VPAG), warning that such measures could hinder future investment in the UK. The financial crisis in the higher education sector also poses challenges.
The government is taking steps to improve the funding landscape. Reforms to UK pension rules aim to unlock billions for venture capital, potentially funnelling more growth capital into scaling biotech firms. Efforts are also underway to make UK listings more attractive to high-growth companies.
On the contentious VPAG scheme, the Health Secretary has pledged a rapid review—an encouraging sign that the government is listening to industry concerns. Meanwhile, elements of the revised UK industrial strategy, which places biotech at its core, are expected to be brought forward.
Regulatory reform is central to the government's plan to drive growth alongside the revival of the Oxford-Cambridge Arc. This key biotech cluster could provide the infrastructure needed to expand the sector.
Hotspots
Geographically, The Golden Triangle – Cambridge, Oxford and London – remains the epicentre of the UK's biotech boom. It is no coincidence that this region secured over 70% of all UK biotech startup funding in recent years, nor that global pharma companies have major research outposts there. Other UK regions are also striving to grow their biotech presence. Emerging hubs include Manchester – which saw a 12% jump in biotech jobs last year and is a leader in advanced materials and healthcare-related biotech[3].
While it's difficult to precisely size the UK biotech market due to its overlap with multiple sectors, Beauhurst data identifies 677 companies currently classified under biotechnology—up from fewer than 200 a decade ago, reflecting rapid growth.
Around 60% of these active firms are concentrated in the South East, East of England, and London, with the North West and Scotland completing the top five regional hubs. Within London, key borough hotspots include Camden and Hammersmith & Fulham—unsurprising given their proximity to major research institutions, academia and hospitals.
Extending the definition to include pharma, given that most pharma companies are now biopharma and the total number of active companies has jumped to over 7,000. The top five regions are South East, East of England, London, North West and West Midlands.
Again, measuring the exact amount of venture capital funding is challenging for the same difficulties in sector classification. Still, using PitchBook's biotech and life sciences classification, the sector saw an uptick in VC funding in Q1 2025, with £1.05bn raised. This was the highest Q1 since the pandemic peaks of 2021. However, it should be noted that the quarter saw a few larger deals, including Isomorphic Labs and Verdiva Bio.
Looking at post-pandemic VC funding on a regional basis. London, South East and East dominate, accounting for 70% of funding. This was followed by the North West and Scotland.
Bubble or durable opportunity for real estate?
The evidence to date points to structural longevity, underpinned by deep scientific and societal needs, but also cyclical volatility, reflective of the sector's capital intensity and dependence on breakthrough outcomes.
On the one hand, the long-term drivers are compelling. Advances in genomics, AI-enabled drug discovery, and personalised medicine suggest that biotech will remain a critical growth sector for decades. Andrew Craig, author of Our Future is Biotech, argues that the next wave of trillion-dollar companies will emerge from this space. In the UK, renewed government support and early signs of improvement in life sciences funding point to a stronger real estate demand by 2025.
However, history urges caution. Biotech is prone to periods of exuberance followed by painful corrections. Oversupply is a real risk if developers extrapolate short-term enthusiasm into long-term certainty. The sector's fortunes can stall quickly in the face of a credit crunch or if confidence is shaken by a high-profile clinical failure. Real estate players should resist viewing biotech as a one-way growth story.
Success in this market requires more than understanding traditional property metrics. Developers and investors must track non-traditional indicators such as funding flows, company formations vs cessations, headcount changes, clinical trial pipelines, spinout activity, scientific citations, patent volumes, and policy or regulatory shifts. These signals can help determine whether demand is set to accelerate—or contract.
We are currently in a period of stifled investment, both globally and within the UK. The UK must address weaknesses in its finance ecosystem if it wants to capitalise on its scientific strength. Encouragingly, as UK pension funds gain confidence in the ability of entities like Northern Gritstone, Cambridge Innovation Capital, and Oxford Science Enterprises to deliver returns, this could help redirect more passive capital into expert infrastructure and biotech-focused development. Unlocking domestic institutional capital may be key to sustaining the next growth phase.
Biotech's rise undeniably presents a compelling new frontier for real estate but comes with a complex risk profile. The boom is not just built on market hype—it is driven by genuine scientific advances and rising global healthcare needs. Yet, the journey won't be linear. The most successful investors and developers will strategically navigate the sector's cycles—focusing on knowledge-dense clusters, delivering flexible and future-proofed facilities, and embedding operational and technical support within collaborative ecosystems.
Equally critical will be the ability to build a differentiated brand and product offering—clearly demonstrating to tenants how your space can help them achieve their strategic goals faster and more effectively than the competition. Tenant retention will be as crucial as tenant acquisition in increasingly supply-rich environments.
By closely monitoring the twin currents of science and finance, developers and landlords can position themselves to ride the biotech wave for the long term.
[1] https://www.mckinsey.com/industries/life-sciences/our-insights/the-uk-biotech-sector-the-path-to-global-leadership
[2] PitchBook and Knight Frank Research
[3] https://ckgroup.co.uk/the-best-uk-hotspots-for-a-career-in-the-biotech-and-pharma-industry/