According to the latest figures from DTRE, there’s nearly 900,000 sq ft of latent demand for life sciences space in Cambridge alone – and investment volumes have hit £139m in 2023 to date, with a further £88m under offer.
Not bad for just one part of the UK’s fast-growing life sciences market, which is emerging as one of the go-to sectors for investors at a time where many others have fallen off a cliff face.
And yet, while the money is there to be invested in the sector, it’s also suffering from familiar constraints – a lack of available space. That’s not just in Cambridge and Oxford, but also the sector’s other emerging hotspots, such as Manchester and Bristol.
This is where companies like Mission Street are looking to fill the gap.
The group, founded by Artem Korolev, is looking to use innovative approaches to plug that gap between demand and available space. Projects include the repurposing of retail warehouses, and even a former newspaper office and printing press, into the next generation of life sciences space.
React News sat down with the company’s founder and chief executive, Artem Korolev, and commercial director, Archie Hubble, to hear about Mission Street’s genesis, its pipeline, and where it might look to invest next.
How did you get into real estate, and how did Mission Street come about?
Artem Korolev (AK): I don’t have any family background in real estate. Most of my family are either in science or in advanced engineering originally. When we emigrated from the Soviet Union, my parents had to work their way back up, but ultimately restarted their careers in IT.
What we always had in my family was involvement in the delivery of large-scale projects, but not real estate projects – my grandfather, for example, was involved in building big metallurgical plants and he was involved in the space programme.
I had an interest in the built environment since I was a kid. I was waking my parents up early on a Saturday morning after they had worked multiple jobs, talking about buying an abandoned train factory in New Zealand. And when my dad would ask me what I was going to do with it, I told him I wanted to have a big office in it!
Initially I thought about a career in science, but at the time it was difficult to see the opportunity for entrepreneurship rather than pure academic research – whereas I could see that in real estate, so I studied land economy at Cambridge.
“I had an interest in the built environment since I was a kid”
ARTEM KOROLEV
When thinking about my career during university, I thought that to pursue capital intensive sectors like development it was important to understand investors and capital markets. That route took me first to Morgan Stanley, then to Alpha, which eventually became GreenOak and BentallGreenOak – I was the fourth joiner in Europe, which I found really exciting.
Eventually I wanted to shift from managing capital into the development and hands-on management of real estate. I wanted to merge the analytical, investor-minded approach with knowing how to build, knowing how to lease and asset manage, and see value in buildings. That’s a really powerful combination, because historically the two have been split disciplines.
That’s how the idea of Mission Street came about. I remember bidding on a few assets in Cambridge and Oxford in 2016-17 and noticing the emergence of steep rental growth and lab demand. There was a trend of increasing commercialisation of research on one hand, and a lack of real estate – not just in terms of quantity, but also quality – on the other.
And as I’ve always been entrepreneurially minded, it seemed like an ideal opportunity to launch something that could focus on that sector.
What are your ambitions for your pipeline moving forwards?
AK: We will never grow for the sake of just growing. What we are aiming to do is to not start with the real estate, but to actually start with the customer. And in our sector when thinking about the customer, that means starting with deep analysis of the particular ecosystem.
Where we always start our thinking has been: let’s analyse a particular environment, what are the academic strengths? How does spinoff activity work? What is the funding environment like? Would we want to work there? Then on top of that, what is the real estate environment like? And then figure out where there is a gap that we can fill.
Because in our sector, success in all aspects – from planning to building to leasing – comes from making your building part of the ecosystem. That way, you can form partnerships with interesting customers who are engaged with you and the buildings they’re in, and a pipeline of occupation interest moving from anchor institutions and through the portfolio as they scale up.
Archie Hubble (AH): Setting arbitrary acquisition targets doesn’t really fit into that ethos. We’ve looked all over the country at different cities, and what we keep doing on a rolling basis is identifying where we think there is this gap.
As an example, when we looked at Oxford, the first thing we realised is that it needs an urban innovation district. Yo do this properly you need a scale that supports a cluster, rather than science being pepper-potted around in smaller buildings far from each other. We saw the opportunity to deliver this at the Botley Road retail park, which was suffering from increasing vacancy while presenting a unique chance to develop at scale a nine-minute walk from Oxford railway station.
“A successful life sciences cluster is where the whole is more than the sum of its parts, because of close geographical proximity” ARTEM KOROLEV
As a result, we are now close to completing Inventa, which is a redeveloped former retail warehouse and one of only two laboratory buildings completing in Oxford in the next two years. This will be followed by our much larger Fabrica project nearby – 185,000 sq ft of new build space that allows companies to scale up through the platform.
In Cambridge we’re bringing forward a 23 acre masterplan on vacant land – which is important as it gives us full control, but it also means we can accommodate the whole ecosystem within one district, from early stage incubation to grow-on space, to corporate HQs.
Our committed pipeline is now 1.5m sq ft in the UK and we will add to it where we’re filling a need.
So what does that “perfect” life sciences ecosystem look like for real estate?
AK: When we talk about clusters or ecosystems, what we are saying is that the way innovation now works most efficiently isn’t a big R&D corporate campus in the middle of nowhere, but a more collaborative cluster involving numerous companies and institutions.
There are numerous stakeholders that can act as an anchor to a wider ecosystem – hospitals, large research and development corporates, or academic institutions as just three examples.
You need to understand how those can fit together with the companies and talent they work with, and what can be done to support this. A successful life sciences cluster is where the whole is more than the sum of its parts, because of that close geographical proximity – there is plenty of research that shows knowledge transfer becomes more difficult over larger distances.
There are some challenges to supporting this from a real estate standpoint. First, to bring forward a large scale of development that can support clusters in particular locations, is difficult. Cities like Oxford and Cambridge are historic places, land supply is extremely tight, and infrastructure will take time to respond to the growth taking place in these cities.
“We’re trying to move away from the phrase ‘science park’ in the context of what we’re doing” ARCHIE HUBBLE
It is also challenging to support some elements of company growth from a viability standpoint. For example, with early stage incubation facilities the margins are very low as a pure real estate investment, because you are spending a ton of money building the building, your space efficiency is a lot lower because you’re heavily subdividing it, you need to employ support staff, you need to procure equipment.
On the other hand you have companies with very little funding unable to commit to longer-term contracts. For this reason we typically consider incubation in the context of our larger developments and wider pipeline – to support the pipeline of company growth and drive occupational demand. Internationally, delivery of incubation facilities has often been underpinned by government support.
What do you think makes a modern science park, or the science park of the future?
AH: What we’re doing in Cambridge is unique for us, because we’ve got the scale and we are starting from a large land mass next to the city centre. Typically most of emerging stock and investment opportunities are on existing science parks or there has been something already there. Here, we have this blank canvas which has given us the ability to start from scratch and to rethink how a science district should work in the modern world, rather than looking back at the way they worked before.
We are trying to move away from the phrase “science park” in the context of what we’re doing. What we are trying to create is essentially a part of a city or a town where science happens. That’s both from a design standpoint and from an activation standpoint as well. What’s going on there? Why would people actually come there? In a traditional science park,merely taking down fences wouldn’t solve this – if you had members of the general public walking around, they’d probably be asked what they were doing there – and that approach is exactly what we don’t want.
You’re working in repurposing as well as new build – how do you manage the different challenges behind that?
AK: The key thing on the repurposing is that you should not create a secondary product – something that occupiers will settle for due to shortage of space, rather than what they want. We understand the technical, operational and design needs of our customer base, so we know a repurposing project should deliver equivalent quality to a new build.
We’ve worked on buildings like retail warehouses, industrial buildings and former printing presses, and particularly for the latter it’s important to keep some of its quirkiness, which helps create an attractive environment provided that doesn’t interfere with what our customers want.
In Bristol we are working on the former Bristol Evening Post building, which was designed like a factory – it had everything from the editor’s office, a space for editorial and even where the printing presses were based within the building.
But it had the right slab structure, ceiling heights and accessibility – if you were building new, it wouldn’t differ very much from what was already there. So the challenge is to use our delivery expertise to solve whatever technical constraints exist in the building to deliver a prime product to our customers in the most efficient way. For this building, for example, we are reusing 92% of the existing structure.
Are there any other regions in the UK you’re looking to invest in?
AH: Most of the UK’s regional cities with good universities have got high potential in our sector – some examples include Glasgow, Edinburgh, Manchester, Leeds and Birmingham. The challenge really for us as a specialist real estate operator is understanding supply and demand and the viability of entering those markets, and in most of these locations you don’t have a big liquid occupational market yet.
We have looked at pretty much all of those cities, but we haven’t found the right project. In some cases, one of our competitors was already established there and we felt that it’s not a big enough market for yet another player. In other cases the ingredients (such as strong academic/healthcare anchors) seem to be there, but we’re just not seeing enough evidence of commercial innovation activity where we feel we can viably build and let a building of appropriate scale.
