You’ve been at Stanhope for 34 years or so, how did you get into real estate?
I was always interested in buildings and cities and architecture, and then I had this moment when I realised somebody owns every square foot of the UK, be it city, town or countryside and wondered, ‘how on earth does all that work?’ That got me interested in the planning and development process and that naturally led me to a real estate course. As I had taken geography and economics at A level, I ended up going to Oxford Polytechnic (now Brookes) because it was regarded as one of the best real estate courses (and still is, I believe). Then from there, I got persuaded to come to London by Weatherall Green & Smith, a firm of surveyors. I was a bit resistant; I didn’t think London was where I wanted to be having lived in Oxford and Cambridge, but I ended up here and then I fell in love with London. Although I did try and leave, I came back and that’s when I joined Stanhope.
Tell us a bit about Stanhope.
It’s had different iterations, it’s not like one job, because I joined when Stanhope was a public listed company, then following the early ‘90s recession we became a private company, and then we had the Stuart Lipton exit moment in 2005. And at that point we acquired external shareholders which started with Mitsui and subsequently included AIMCo in 2012 and more recently Cadillac Fairview. When I joined Stanhope, originally, I think I was about the 100th employee and it went up to about 130. Then very quickly, it was down to about 10 at the point British Land acquired Stanhope in 1995. We all walked around the corner and started the private company.
What’s the benefit of being at one place for 34 years?
It’s not unusual for people to stay at Stanhope for a very long time, as a result we have many years of experience across the whole development process, which is invaluable for progressing and de-risking projects. Four of my current colleagues were here when I joined back in 1989, so I’m still the younger brother! Stanhope had such a reputation that it was like working for the Rolls Royce of developers. I was 25 when I got my job here, so I was really fresh. The very first project I got us involved with was in Cambridge. I remember it vividly there was this Estates Gazette article about a piece of farmland near Cambridge, that was a potential contender for what was then a new settlement that was required for Cambridge, and it was to include a significant element of business parks. Really, this was a sort of forerunner to the whole life science thing, described at the time as the ‘Cambridge phenomenon’.
You’re Head of Life Sciences at Stanhope. How did that start up?
That started up off the back of the British Library Project. Back in 2012/13, we refurbished a building opposite the British Library, on the Euston Road. During the refurbishment, we pre-let the whole building, on a long lease to The Doctors Laboratory, who we’d never heard of. They are pathology laboratory specialists and their fit out was for laboratories, with all this equipment in it, proper scientists in white coats. We thought, why is this in the middle of London? It got us thinking that there was something going on here. We started to do some research, and this suggested a new urban demand for spaces that can accommodate labs. At the same time the BL came out looking for a development partner, with the Francis Crick Institute under construction to the rear and the Alan Turing Institute established in the BL, the Library’s site was in a prime position. Our research indicated that there were emerging knowledge clusters based around proximity to academia, research institutes, teaching hospitals etc, and the most mature one is the Knowledge Quarter focused on one mile around St. Pancras and King’s Cross. Everybody’s there, the UCLH and Great Ormond Street hospitals, UCL, the Francis Crick Institute, the Alan Turing Institute, Google, DeepMind, Wellcome Trust, the museums, the library and now MSD.
Let me ask you about the partnership with Cadillac Fairview because that has really become a driving force. You’ve done a number of key life science investments with them in Cambridge, Oxford and London.
We got to know Cadillac at the time they were seeking to establish a London office. The relationship cemented when they acquired White City Place, which is a project we had worked on since 2015, and had attracted a mix of occupiers including life science companies, where Stanhope are the Asset Manager. CF wanted to invest in Life Science assets, within the Golden Triangle, and the one that really took off was Oxford North – a million square feet within the Oxford City boundary. We have since acquired two plots on the Trinity College Science Park, which is one of the oldest science parks in the UK in Cambridge.
The fact that almost all the life sciences development really is inside that golden triangle of Cambridge, Oxford, London, is that a strength or a weakness?
I think it’s a real strength. On the world stage, we’ve got Oxford University, Cambridge University, UCL, Imperial and Kings. Those five are up there in the top global universities. That is a real expertise, if you like, and a real USP. Oxford, Cambridge and London are not very far from each other, if you look at the American context that’s a much more mature market. But they don’t have that concentration of universities within 50 miles of each other. So, it’s a real strength to have that.
Can you give an overview of where you think life sciences is as an investment opportunity right now?
I think it’s healthy because I think the fundamentals are not going away because they are based on some pretty big issues like ageing populations, productivity, keeping everyone healthy and dealing with the big chronic illnesses such as dementia or cancers. So, none of that is going away. If you look back, it has been sustainably growing through economic shocks like the great financial crash and now it’s worth £90 billion to the UK economy and there’s 270,000 people directly employed in it. Yes, it’s not immune to economic shocks, and VC money has been more constrained recently, but it’s regarded as a sort of hedge against them.
Is it regarded as a bona fide real estate asset class? Do you think it’s reached that status now?
It must be on the cusp of getting there. We’ve now recognised other sorts of alternative investments like BTR and student accommodation. It’s quite tricky to invest in for a number of reasons. You’re competing with other uses in urban areas, on values that are not well known. It’s an immature market. It’s not like how everyone knows office values and office costs everywhere. It’s quite unknown in that regard. The specification for lab-enabled space has no industry standard, as yet. Most of the demand is coming from companies that you haven’t heard of, and you need those companies in your development to attract the bigger companies. So, it’s quite a difficult profile for investors.
Can you walk through what life sciences firms actually need, by way of real estate? What are they looking for?
I think they’re looking for a location that is close to the talent, who are generally in the top universities. That’s why I mentioned the clusters and being close to the research institutes or hospitals and universities. You need to be close to the ideas and the post grads that have been attracted to universities because they’ve got great teaching and equipment to go and do their research, in order to crack the big challenges and diseases. There is also a whole mishmash of huge medical breakthroughs merging with technology and digitization and AI. So that leads to a demand for the right locations.
When you work that out, you need to build a building they can do their work in, and their work may require labs – fume hoods, more power and floor to ceiling height than your average office. You also need a more robust structure because vibration is a key issue for some of the equipment, plenty of goods lifts because you’re dealing with gases and chemicals and things like that, that can’t go in a lift with people and need to be stored carefully. You’ve got waste coming out that is potentially toxic and dangerous. You need really good deliveries, loading bays.
Laboratories are either wet or dry. A wet laboratory is your lab coat person with goggles and fume hoods and test tubes and lots of equipment – you can probably picture that. But there’s also dry laboratories for computational science – no white coats required. With those you need a lot of air movement to cool all the equipment down. That’s much more akin to a more traditional office.
What’s your view of life sciences from a human capital hiring perspective? Is there a skill shortage? Is it difficult to find the right people?
You really need somebody who understands these businesses and science to be on the property side, the asset management side. You need people who are scientists who are willing to step into the real estate shoes. I think that’s a skill shortage. There are very few people like that. It is quite hard to extract them because if they all think they can be brilliant scientists and if they’ve got a bit of business acumen then they can become billionaires in their own right!
If I give you a crystal ball and asked you to gaze 10 years into the future, what do you think life sciences as an investment sector will be like?
I can’t see the huge societal issues that are driving it going away in 10 years. I think as a sector it’s going to really grow with huge advances through technology, AI, medical devices, and as such it’s going to sustain demand for real estate.
Just a personal question to end on, if you didn’t do this for a living, what would you have done?
I always liked architecture and that for me was always the big issue. Why didn’t I do architecture? I was always drawing. But I think I found out that being a developer was almost better than being an architect because you could be a bit of an architect and you’re always one step ahead because an architect has to wait for the phone to ring. There has to be a client saying, I want you to do this, or can you draw this? Then annoyingly, clients say, no, I don’t like that, I want this, so you’re going to have to change that. So, I think I ended up in the right place really.