Whilst some businesses are trying to encourage a return to the office, hybrid working seems here to stay for the majority resulting in a surplus of vacant office space. With this and a critically low supply of high-quality lab space within the life sciences sector in London, are lab conversions the obvious answer to office space voids?
Several conversion projects are already in the pipeline. Planning permission was recently obtained by Oxford Properties and Pioneer Group to convert Grade II listed Victoria House in Bloomsbury Square into a “state of the art” life sciences hub.
Whilst conversions are likely to provide quicker, cheaper and more ESG-friendly solutions than the new build route there are a number of points to bear in mind from a property perspective.
Location, location, location
Occupiers will want to be near (or easily able to access) world class universities, hospitals and research centres (i.e, “clusters” which have all of the essential components of the life sciences ecosystem including business, universities and hospitals). Victoria House, for example, is located within London’s Knowledge Quarter in the vicinity of King’s Cross life science’s hub.
Fit-out & alterations
Many firms in this sector have bespoke occupational requirements and so landlords will want to understand these specific needs at an early stage. Whilst offices and labs fall under the same Use Class E, planning permission may be required for certain works such as new risers, increased exterior plant and/or storage for certain chemicals and gasses. A traditional alterations clause in a lease is unlikely to be appropriate to meet such requirements.
As well as the usual planning considerations, issues may arise over the storage and disposal of chemical waste and hazardous materials. Landlords will usually require the tenant to be responsible for compliance with any statutory and regulatory requirements, including health and safety. There are also likely to be specific decommissioning requirements, including the possibility of an exit survey, when the lease is due to expire.
Higher power and other utility requirements are also a common feature in this sector. Upgrades to existing infrastructure will need to be considered with an agreement being reached as to how these works are to be addressed and paid for. The existing building’s floor to ceiling heights and internal infrastructure should be considered as well as the tenant’s fit out requirements.
Assignment and underletting
Occupiers may also wish to share occupation with a third party, outside of the standard group sharing arrangements, where it is necessary for them to join forces with others on certain projects or research. There may also be an increased demand for flexibility given how quickly a business can change in this sector, whether being bought out and/or needing to scale up. Again, any such flexibility should be considered and agreed so that it can be appropriately documented.
Working from home is less of an option in the life sciences sector and so landlords should be alive to customer well-being by incorporating amenities and other spaces that enhance the employee’s experience in order to attract the highest calibre of occupiers. Victoria House will feature 80,000 sq ft of amenity, meeting and retail spaces as well as a club lounge and roof terrace. In addition to these usual amenities, there are likely to be bespoke requirements for chemical storage, freezer rooms, clean rooms and, as referred to above, shared space and meeting rooms to allow occupiers to collaborate.
In summary, there is unlikely to be a universal solution to the issues that may arise in office conversions and much will depend on the specific requirements of each occupier and the nature of the building to be converted. A forward- thinking and proactive approach and early consultation with tenants will be key in ensuring a successful project.
But in what will be seen as a boost for the UK life sciences industry, a flurry of investors are looking to create specialist sites in London with more opportunities arising to do so as traditional offices become less in demand. These could be lucrative decisions for those putting spades in the ground imminently.