The footprint of Beijing’s life sciences enterprises
Stimulated by favourable policies and with Covid-19 reinforcing the demand, the thriving life sciences industry is increasing its footprint in Beijing.
The life sciences industry in China has entered an accelerated development stage after the COVID-19 outbreak in 2020. In 2022, life sciences companies ranked third among more than 100 enterprises in the China A-share market with a market value of more than CNY 100 billion. According to the 14th Five-Year Plan of the People's Republic of China, the pharmaceutical and health industry aims to achieve an operating income of CNY 1 trillion by 2025. To accomplish this macro goal, the current market size need to more than quadruple.
The real estate allocation of life science enterprises is concentrated in business parks.
Life sciences companies essentially require areas for production, R&D and experimental facilities. Therefore, their real estate-related needs are concentrated in business parks due to their supporting facilities, such as R&D laboratories, biological cleanrooms, and constant-temperature cold-storage warehouses. JLL's 2022 survey showed that Beijing’s leading life sciences corporations are mainly located in business parks (accounting for 67% of the total space), followed by office buildings (33%).
In comparing the characteristics of business parks with office buildings, expenditures associated with business parks, such as leasing or purchase prices, as well as operational and maintenance costs, are usually more economical for corporations. In addition, most biomedical enterprises can benefit from the industry cluster effect and rewards, subsidies, etc., from favourable policies in the area. Considering the speed of expansion of current manufacturing and business enterprises, the growth potential of life sciences parks is promising in short- to mid-term.
Zhongguancun Science Park, which includes 16 member parks, holds a core supply position in the Beijing business parks market.
The current supply of high-quality life sciences business parks is insufficient to meet demand, and most properties are developed and operated via state-owned capital. Although the prime land transactions are under strict supervision, the opportunity for secondary project renovation has emerged with a favourable policy published by the Administration Committee of Beijing Economic-Technological Development Area (BDA) in March 2020. This policy encourages the transformation of industrial sites into business parks under the condition that the original project must complete construction by six years and above 2,000 sqm. Combined with market trends, the future supply pattern can be predicted as primarily involving state-owned capital and developers, supplemented by pharmaceutical companies acquiring land for self-use development.
Life sciences business parks present growth opportunities in the already accelerated upward trajectory of the industry. Additionally, possibilities exist in the supply market for social capital participation and state-owned assets. The scope of project renovation emerging from 'urban renewal' plans provides another window for investors. However, they must overcome challenges such as the scarcity of investable projects and policy compliance requirements to leverage these prospects.