Asia Pacific Major Report - A New Era Of Life Sciences Growth by CBRE-SEA

CBRE RESEARCH | ASIA PACIFIC

A NEW ERA OF LIFE SCIENCES GROWTH Opportunities for Occupiers and Investors

UNPACKING THE POTENTIAL OF THE ASIA PACIFIC LIFE SCIENCES SECTOR Growth Prospects

R&D Capabilities

Policy Support

Asia Pacific is home to about

60% of the global population Regional health expenditure accounts for just

6% of GDP

compared to 17% in the U.S.

Many countries have identified life sciences as a

Strategic Industry

The number of life science research journals in Asia Pacific increased by more than

40%

and are providing incentives to support growth Asia Pacific accounted for

28%

between 2016-2020

The total volume of space suitable for accommodating life sciences R&D and related facilities amounted to over

100 mil sq. ft.

of listed life sciences companies’ global revenue in 2020

in Asia Pacific as of the end of 2020

LIFE SCIENCES CORPORATE REAL ESTATE PORTFOLIO STRATEGY Pharmaceutical Logistics • • •

•

Increasing demand for high specification facilities Enhancing distribution networks and final mile efficiency is a key occupier focus Demand for high quality facilities and occupier stickiness make assets investmentworthy despite smaller size requirements Occupiers should target suitable facilities or collaborate with owners to enhance assets

Research & Development (R&D) • • • •

Corporate Office • • •

Corporate office leasing by life sciences firms in Asia Pacific rose 16% y-o-y in 2020 Many occupiers adopting activity-based working and hybrid work models Tenants can capture current leasing market weakness to optimise portfolios before a full recovery

Source: WHO, Oxford Economics, Capital IQ, Nature Index, CBRE Research, June 2021

Growing number of R&D lab facilities in science parks across the region Mostly government owned or linked to preferential policies to grant land to end-users Gradual emergence of co-labs and incubator programmes to support start-ups Occupiers are advised to leverage government incentives to strengthen R&D capabilities

Manufacturing Facilities • • •

More facilities cater to domestic demand and speed to market New plants for vaccine production planned for Singapore, China, Australia and Korea Tenants are recommended to review manufacturing facility networks and scale up capacity © 2021 CBRE, INC. |

LIFE SCIENCES AS AN INVESTIBLE ASSET CLASS Sale leasebacks and disposals

Asset conversion

Public-private partnerships

Asset development

Engage pharmaceutical companies keen to conduct sale leasebacks or dispose of assets to improve balance sheets

Reposition aged light industrial properties into laboratories or cold storage

Target development opportunities in newly planned science parks through government partnerships or land tenders

Develop build-to-suit facilities with pharmaceutical companies

POTENTIAL INVESTMENT MARKETS

P R IM A RY L O C ATION S

Source: CBRE Research, June 2021

CONTENTS 03

A S I A PA C I F I C O V E R V I E W

G R E AT E R C H I N A : S H A N G H A I , B E I J I N G, H O N G KO N G S A R

J A PA N: TO KYO

KO R E A : S E O U L

SINGAPORE

I N D I A : B A N G A LO R E , H Y D E R A B A D

A U S T R A L I A : S Y D N E Y, M E L B O U R N E

| 2021 ASIA PACIFIC LIFE SCIENCES

ASIA PACIFIC OVERVIEW Asia Pacific is home to approximately 60% of the global population. The region includes the many of the world’s most populous and fastest-growing countries as well as several rapidly ageing societies. Supported by expanding demand from a large and ageing population and a steady flow of M&A activity, recent years have seen the life sciences industry experience rapid growth in Asia Pacific. Although global pharmaceutical giants from the U.S. and Europe continue to dominate the market, homegrown firms are expanding rapidly. Other key developments include the emergence of Asia Pacific life science clusters with the talent, infrastructure, facilities, manufacturing capacity and other critical environments required to meet the industry’s highly specialised demands. This report by CBRE Research provides an overview of Asia Pacific life sciences real estate, focusing on the key trends, demand drivers, corporate real estate strategies and investment opportunities in the region’s major life sciences hubs.

1 HUGE GROWTH POTENTIAL Asia Pacific’s large population and rising middle class are underpinning the rapid growth of the life sciences industry, which CBRE defines as including the pharmaceutical, biotechnology, medical equipment, food science and healthcare sectors. Despite its large market size, health expenditure in Asia Pacific stood at just half of that in the U.S. (US$3,475 billion) in 2018. While mature markets such as Japan and Australia spend around 10% of their GDP on health, most other countries in the region spend just 2-7%. With health expenditure in the U.S. accounting for close to 17% of GDP, this indicates substantial room for growth in Asia Pacific Pharmaceutical production in Asia Pacific also lags, with the region’s total medical exports accounting for just 9% of the global total (US$393 billion) in 2019. India is a major exporter and one of the world’s largest suppliers of COVID-19 vaccines, while Japan and China are major production bases, albeit primarily for domestic consumption. Singapore is another major market for drug production. Figure 2: Exported medicines by market

Figure 1: Health expenditure by market 800

$20

700

10 $15

400

300

200

US$ Billion

500

% of GDP

$10

% of GDP Source: WHO; 2018 data; Current health expenditure by revenue of healthcare financing schemes; Hong Kong Food and Health Bureau

| 2021 ASIA PACIFIC LIFE SCIENCES

Source: Central Intelligence Agency, 2019 data

Indonesia

Korea

Hong Kong SAR

Australia

Mainland China

Singapore

Hong Kong SAR

Health expenditure

Indonesia

India

Korea

Australia

Japan

Mainland China

Japan

100

India

US$ Billion

600

2 PRO-GROWTH POLICIES Several major Asia Pacific markets have identified life sciences as a strategically important industry and have introduced supportive policies to facilitate the development of the sector. These policies have spurred the proliferation of domestic pharmaceutical companies and supported the expansion of international pharmaceutical firms seeking to establish headquarters in the region. Growth in the number of homegrown firms has been especially swift, with Asia Pacific-based companies now accounting for 28% of listed life sciences firms’ global revenue. Among listed Asia Pacific life sciences firms, mainland Chinese and Japanese companies generate the highest revenues.

Figure 3: Global revenue breakdown of listed life sciences companies Other 2% Europe 22%

Americas 48%

Asia Pacific 28% Source: Capital IQ, June 2021 Number of listed life science companies globally = 5,174

Growth among Chinese companies has been supported by several major policy measures, with China’s 14th Five-Year Plan and Healthy China 2030 initiative both identifying life sciences as one of seven strategic growth industries. The coming years will see authorities extend support to the development of proprietary technology and increase medical production capacity for the domestic market. R&D capabilities will be clustered in tier 1 cities and are set to become globally competitive.

| 2021 ASIA PACIFIC LIFE SCIENCES

Hong Kong SAR is an important fund-raising centre for mainland Chinese domestic companies. Since the Hong Kong Stock Exchange introduced a new regime to attract biotech company listings in April 2018, a total of 43 healthcare and biotech Chinese companies have been listed on the Main Board, raising a total of HK$37 billion (US$4.8 billion). This figure is equivalent to 0.6% of the sector’s total market capitalisation listed in the Hong Kong SAR. The Biomedical Technology Cluster at Hong Kong Science and Technology Park, next to the Chinese University of Hong Kong, serves as the local industry hub, with drug production capabilities set to be strengthened further in the coming years through collaboration with and integration into the Greater Bay Area (GBA). In India, the Karnataka Biotechnology Policy 2017-2022 has simplified administrative and clearance processes to attract investment into the life sciences sector. The policy also streamlines financial incentives and concessions for larger investments, supports R&D in emerging technologies and aids the formation of startups. The latest Telangana Life Sciences policy also provides rent and investment subsidies along with financial incentives for research, including co-financing with industry sponsors for productspecific development. Since the 1980s, Singapore’s government has been providing an ecosystem and infrastructure for major pharmaceutical companies and small biotech startups. In its sixth science and technology plan (RIE2020), the government has committed SGD 4 billion (US$3 billion) to health and biomedical science, including grants for research projects and salary support programmes for scientists and clinicians. The Australian government has provided Research and Development Tax Incentives (RDTI) since 2011. The scheme features a 43.5% refundable tax offset for eligible entities with an aggregated turnover of less than AUD 20 million per annum (US$15 million). The country also offers Australian Innovation and Manufacturing (AIM) incentives, which permit a reduced tax rate on qualifying profits from intellectual property. Japan, which faces numerous health challenges due to its ageing population, is exploring how to deliver healthcare products in more costeffective ways, while also raising investment in R&D.

3 BOOSTING R&D CAPABILITIES Western firms dominate the global pharmaceutical industry, with Takeda the only Asia Pacific company listed among the world’s top 10 firms by total revenue. However, government support for homegrown companies and the ownership of core technologies is helping the region catch up with the U.S. and Europe in terms of research and development (R&D) capabilities. The number of Asia Pacific life sciences research journals has increased more than 40% over the past four years, led by mainland China and Japan. Recent years have also seen the proliferation of R&D facilities in Asia Pacific to support corresponding functions. CBRE data show that the total leasable area suitable for accommodating R&D and life sciences related facilities in Asia Pacific amounted to over 100 million sq. ft. as of the end of 2020, with mainland China, India and Singapore possessing the largest quantum of space. China’s high-tech parks account for the largest single portion, with stateowned labs also well represented across the country. In India, new clusters for R&D are being formed in Bangalore, Hyderabad and other locations adjacent to tier 1 cities. Singapore possesses two well-developed life sciences clusters to support R&D development. As demand for such facilities increases regionwide, Asian countries are committing to constructing more laboratories with the highest biosafety levels (BSL-4)1. These include Nagasaki University, which is due to be completed this summer, and DSO National Lab in Singapore, which is targeted to come on stream in 2025. Safety considerations mean these facilities are subject to tight regulations, government accreditation and rigorous management.

1 BSL-4

is the highest level of biosafety precautions. BSL-4 laboratories are generally set up to be either cabinet laboratories or protective-suit laboratories

| 2021 ASIA PACIFIC LIFE SCIENCES

Figure 4: Number of life sciences research papers published in natural-science journals 13,046

2016

3,626

United Kingdom

2018

2019

2020

3,147 1,375

United States

2017

China

Japan

1,200 Australia

515 Korea

350 Singapore

227

215 India

Taiwan

160 New Zealand

Note: The number of research papers is based on the publication output of an institution or country in 82 natural science journals, selected on reputation by an independent panel of leading scientists in their fields. Source: Nature Index, May 2021.

Figure 5: Biosafety level 4 (BSL-4) laboratories in Asia Pacific Country

Location

Facilities

Australia

Geelong VIC

Australian Centre for Disease Preparedness (ACDP)

Australia

Westmead NSW

Emerging Infectious Diseases and Biohazard Response Unit (EIBRU)

Australia

Melbourne

Victorian Infectious Diseases Reference Laboratory (VIDRL)

China

Harbin

Chinese National High Containment Facilities for Animal Diseases Control and Prevention, Harbin Veterinary Research Institute

China

Wuhan

Wuhan Institute of Virology, Chinese Academy of Sciences

India

Pune

Microbial Containment Complex (MCC), National Institute of Virology

India

Bhopal

High Security Animal Disease Laboratory

Japan

Nagasaki

Nagasaki University BSL-4 (expect completion in summer 2021)

Japan

Tokyo

National Institute of Infectious Diseases (NIID)

Singapore

To upgrade facility in DSO National Laboratories (target complete in 2025)

Source: WHO, June 2021

4 OCCUPIER STRATEGY IN THE COVID-19 ERA As in other industries, COVID-19 era occupier strategy in the life sciences sector is heavily driven by cost containment and flexibility, even though most companies in the sector have performed resiliently since the onset of the pandemic. Life sciences companies’ portfolios typically consist of four major components, namely corporate offices, logistics facilities (including cold storage), R&D laboratories and manufacturing facilities (Figure 6). In the corporate office segment, domestic life science companies are displaying a strong appetite for expansion. In contrast, many international life sciences companies, especially those involved in recent M&A activity, are consolidating sales offices to achieve efficiencies and costs. The adoption of remote working has also enabled international pharmaceutical firms to adopt Activity-Based Workplaces (ABW) featuring high desk sharing ratios for sales staff (1:4 to 1:5). While such firms like to maintain hub offices in key cities, locational preference for core or decentralised areas is mixed and depends on individual companies’ business requirements. Organic growth and flight-toquality relocations led to 17.4% y-o-y growth in life sciences leasing volume in 2020, compared to a 25% decline in the overall leasing market. The most active markets for life sciences office leasing are Shanghai, Beijing, Tokyo, Bangalore and Hyderabad. Demand is growing for specialised R&D facilities across the region. China is providing preferential policies to support new R&D set-ups in key industrial parks, with Zhangjing in Shanghai a leading example. Authorities are also playing a role in providing facilities, such as those at Biopolis in Singapore and the Science Park in Hong Kong. Proximity to universities is a key requirement for R&D facilities, particularly in Japan, where universities often sponsor R&D projects. However, this also means the volume of R&D facilities available for lease on the open market is limited. In Australia, there are more leased facilities in life science clusters close to universities and major hospitals. Pharmaceutical manufacturing facilities tend to be located in India, China and Japan, with most such sites being self-owned. There is increasing demand for high specification logistics facilities, including cold storage, partly due to specialised storage requirements for mRNA COVID-19 vaccines. However, the total quantum of demand remains limited. 12

| 2021 ASIA PACIFIC LIFE SCIENCES

Figure 6:

KEY COMPONENTS OF LIFE SCIENCE COMPANIES’ CORPORATE REAL ESTATE PORTFOLIOS

Office

R&D labs

Pharmaceutical companies

Genetic engineering

Cell engineering

Plasma

Cell culture gene

Enzyme engineering

Fermentation engineering

Antibodies and Enzymes

Low Serum Medium

Protein engineering

Others

Antigen

Others

Pharmaceutical companies

Research Organizations

Other chemical raw materials

Universities

Biomedical manufacturing

Logistics and Sales Distributors

Pharmaceutical companies

Large sized manufacturing plants

Raw materials

Biotechnology R&D Research Organizations

Business Parks

Distributors

Logistics

Genetically engineered drug

Wholesales

Consumers

Blood products

Retail

Pharmaceutical companies Vaccine

Diagnostic reagent

Others

Hospitals

Cold Chains

Retail Shops

Offices

Business Parks

Offices

Outsourced and small sized manufacturing plants

Source: CBRE Research, June 2021

Occupier strategy in the COVID-19 Era (Continued)

Life sciences demand for real estate is correlated with individual markets’ overall strength and growth potential. To evaluate the competitiveness of major Asia Pacific life sciences markets, CBRE has used its own data and third-party information from the World Health Organisation, World Bank and Central Intelligence Agency to assess each market according to 12 variables across four key categories. Aspect

Metric

Rating

• •

5 – Established manufacturing plants for life sciences; high availability of facilities (e.g. industrial parks) to support production; government support for manufacturing

Manufacturing output Factory facilities suitable for pharmaceutical manufacturing

Manufacturing

1 – No pharmaceutical manufacturing activity; No suitable facilities and government support for manufacturing

• • Research & Development (R&D)

• • • •

Pharmaceutical Logistics

•

• • •

Quantity of R&D facilities University ranking in life sciences related subjects Government support for R&D Talent pool

5 – world class R&D; high university and talent availability; life sciences identified as priority for development

Infrastructure (e. g. airports, seaports, road access, railways etc) Function for import/export of pharmaceutical products Supply chain management and capability of freight forwarders Availability of cold storage specialised for life sciences

5 – World class infrastructure (e.g. airports, seaports and highways) to support logistics; availability of cold storage and specialised warehouses suitable for pharmaceutical products

Function as front office for sales National/regional headquarters function

5 – World class gateway city for business; internationally reputable rule of law; established location for companies to run their regional business

1 – minimal R&D activity; lack of talent; no government policy support

1 – Underdeveloped infrastructure and low availability of suitable storage facilities

1 – Low tier city; limited business potential for life sciences locally; difficult to attract talent

Sales

Source: CBRE Research, June 2021

CBRE’s study found that Beijing and Shanghai are the most competitive cities for the life sciences sector owing to their manufacturing and R&D capabilities and large domestic market. Shanghai’s port enables it to outperform in terms of the supply chain, while Beijing is reliant upon neighbouring cities for exports. CBRE’s study also identified several key cities around the Yangtze River Delta (YRD), Bohai Bay and GBA as key life sciences hubs in mainland China. These include Suzhou, Hangzhou, Nanjing, Tianjin, Shijiazhuang, Jinan, Shenzhen, Guangzhou, Wuhan and Chengdu. Hong Kong SAR also has a prominent role to play in supporting growth in the GBA and as a location for fund raising.

| 2021 ASIA PACIFIC LIFE SCIENCES

Japan and Singapore also rated highly in CBRE’s evaluation. Japan is home to several established domestic life sciences giants, many of which operate their own R&D laboratories and manufacturing facilities outside Tokyo and in Yokohama. However, the fact that just a few R&D facilities are open to startups limits industry innovation. Singapore's competitiveness is supported by the government’s long-term vision, a vibrant research ecosystem, deep talent pool and reliable infrastructure. While the city-state is highly regarded for its high value-added manufacturing functions, status as a hub for regional headquarters and research and development activity, its relatively small market size and geography limits its ability to build manufacturing scale. India has emerged as the world’s largest COVID-19 vaccine production base. Most of the country’s life sciences facilities are located in Bangalore, Hyderabad and Pune. While some core R&D functions are also situated just outside tier 1 cities, India’s core and advanced technological development is still playing catch up with the rest of the region. Owing to its mature and transparent business environment, Australia is a well-established hub for the biomedical industry. R&D facilities in Sydney, Melbourne and Brisbane are all complemented by the presence of university research institutions, with Melbourne home to the world’s second-best university for biomedical research. The city attracts 40% of national medical funding and is a base for 41% of all Australian life sciences companies.

Figure 7: Asia Pacific life science industry market competitiveness Manufacturing

R&D

Logistics

Sales

Shanghai

Beijing

Hong Kong SAR

Seoul

Tokyo

Singapore

Bangalore

Hyderabad

Sydney

Melbourne

Rating from 1-5; 1 being the least competitive; 5 being the most competitive Source: CBRE Research, June 2021

5 INVESTING IN LIFE SCIENCE REAL ESTATE The pandemic-driven acceleration in R&D and active life sciences investment in other regions, most notably the U.S., are drawing buyers to the sector in Asia Pacific, with sophisticated facilities for R&D, manufacturing and highspecification storage attracting strong enquiries. However, direct investment in such assets remains limited, with just a few transactions for manufacturing / office plus R&D facilities recorded in Australia, Japan and China over the last 24 months, and isolated cases of international pharmaceutical companies restructuring their existing portfolios and disposing of underutilised facilities. The period also saw some sale leaseback deals for distribution centres and corporate offices by pharmaceutical companies looking to improve their balance sheets or recycle capital for future R&D projects. While committing capital into co-mingled funds investing in life sciences real estate is a potential entry route for investors, such funds are mainly focused on assets in the U.S. and Europe. In March of this year, Korea’s National Pension Service committed US$500 million to Blackstone’s Life Science Office Real Estate Perpetual Fund, which owns office and laboratory facilities in the U.S.. There are just two life sciences and pharmaceutical real estate focused funds in Asia Pacific, namely LC Core Opportunistic Fund I and II, both managed by Singapore based Lighthouse Canton. The lack of investment activity in Asia Pacific life sciences real estate is due to several factors. As most of life sciences facilities are purpose-built and self-owned, they are not available for sale. Government concessions to support the sector mean that many facilities are leased or their associated land sold at below market value. In addition, many R&D and manufacturing facilities are owned by universities, government institutes and end-users, making it even more challenging for buyers to source opportunities. Concerns over the covenant strength of smaller life science companies may also hinder deal flow as the investment period for new pharmaceutical and medical devices is frequently very long.

| 2021 ASIA PACIFIC LIFE SCIENCES

Figure 8: Recent life sciences real estate investment transactions in Asia Pacific

Date

Country

City

Property Name

Q3 2019

Japan

Various

Takeda property portfolio (21 assets)

Q3 2020

Japan

Kanagawa

IIF Shonan Health Innovation Park (57% stake)

Q3 2020

Australia

Sydney, Brisbane

Sigma Pharma’s two distribution centres

Q1 2020

Japan

Tokyo

Lion HQ Building

Q3 2019

China

Suzhou

Suzhou API Manufacturing Campus

Q2 2020

China

Shanghai

Q4 2019

Sector

Transaction Price Buyer (US$mn)

Seller

Remarks

Office + residential

466

GreenOak

Takeda

Sale leaseback

R&D + manufacturing

208

IIF REIT

Takeda

Sale leaseback

Warehouse

123

LOGOS

Sigma Sale Pharmaceuticals leaseback

Office

122

Haseko

Lion Corp

Manufacturing

110

Zhejiang Jiuzhou Novartis Pharmaceutical

Medipharm Biotech Technology Park

Office + R&D

Morgan Stanley

Medipharm Biotech Disposal Pharmaceutical

Australia Sydney

Novartis Macquarie Park Building

Office

CorVal

Novartis

Sale leaseback

Q1 2021

India

A manufacturing facility for producing Manufacturing Zantac

Hetero Labs

GSK

Disposal

Q3 2018

Probiotec Australia Melbourne Manufacturing Facility

Manufacturing + warehouse

Ascot Capital

Probiotec Ltd.

Sale leaseback

Q3 2020

Korea

Seoul

Philosys Healthcare Building

Office + R&D

AddPharma

Philosys Healthcare

Disposal

Q4 2020

Korea

Seoul

Korea Bio Park B (units 901-903)

Office

Private individual NC&

Vemgal

Sale leaseback Disposal

Disposal

Source: RCA, CBRE Research, June 2021.

While life sciences real estate is at a nascent stage of development as an investible asset class, CBRE believes the sector holds significant potential. Entry routes include, but are not limited to, the following: Investors seeking income-producing assets can target sale leasebacks or disposals by life sciences companies looking to improve their balance sheets or offload non-essential assets following M&A. Most such opportunities are available in Australia and Japan. Korea, where ownership restrictions in the Pangyo 1st Techno Valley began to expire in 2020, also offers prospects. CBRE expects numerous assets to come onto the market in the coming years as pharmaceutical companies recycle capital for R&D. As some of these assets are multi-use sites and include industrial, laboratories and offices, investors should note that they will have to purchase such properties in their entirety. Value-added investors can consider converting older industrial properties into BSL-1/BSL-2 laboratories or cold storage. This strategy is more appropriate for markets with a limited supply of land dedicated to accommodating the life sciences sector, such as Hong Kong SAR and Japan. While assets do not necessarily have to located in city centres – a criteria that may help lower initial investment – any properties will need to comply with certain specifications related to ceiling height, floor loading, and floorplate, along with power capacity for additional ventilation systems and waste management. Given the prominent role of government bodies in promoting the development of the life sciences industry, investors are advised to consider forming partnerships with local authorities. Some science parks also permit developers to obtain land from the government to develop build-to-suit facilities. Examples of this trend include private entity Labzone’s participation in the Bengaluru Life Science Park in Bangalore. In Singapore, developers can lease business park sites for 30 years plus another 30 years through a tender, with Ascendas and Ho Bee Land using this approach for their development projects in Biopolis. As life sciences assets attract investor interest, yields will be tight, particularly for R&D labs. Manufacturing facilities will offer relatively higher yield given their unique specifications.

| 2021 ASIA PACIFIC LIFE SCIENCES

Figure 9: Approaches to investing in life sciences real estate

Sale leasebacks and disposals Engage pharmaceutical companies keen to conduct sale leasebacks or dispose of assets to improve balance sheets

Asset conversion

Public-private partnerships

Asset development

Reposition aged light industrial properties into laboratories or cold storage

Target development opportunities in newly planned science parks through government partnerships or land tenders

Develop build-to-suit facilities with pharmaceutical companies

Target Markets • Japan • Australia • Korea

• Hong Kong SAR • Japan

• • • • •

Mainland China India Singapore Japan Korea

• APAC major markets

INDIVIDUAL MARKET OVERVIEW

PRIMARY LOCATIONS

| 2021 ASIA PACIFIC LIFE SCIENCES

Shanghai

Comprehensive Market

Beijing

Comprehensive Market

Tokyo

Comprehensive Market

Singapore

Comprehensive Market

Melbourne

Comprehensive Market

Sydney

Front Office / Headquarters

Seoul

Front Office / Headquarters

Hong Kong SAR

Front Office / Headquarters

Hyderabad

Manufacturing Hub

Bangalore

Manufacturing Hub

SECONDARY LOCATIONS A

Ahmedabad

Nanjing

Vadodara

Suzhou

Ankleshwar

Hangzhou

Valsad

Wuhan

Pune

Guangzhou

Chennai

Shenzhen

Visakhapatnam

Osaka

Delhi NCR

Yokohama

Chengdu

Brisbane

Shijiazhuang

Gold Coast

Tianjin

Adelaide

Jinan

Perth

I M

H Q

A B

D G

U V

X W P RIMARY L O CATIONS S ECONDARY L O CATIONS

MARKET OVERVIEW

GREATER CHINA

Mainland China is the world’s second largest pharmaceutical market, with total drug sales reaching just under US$1 trillion in 2019 2, 20% higher than in Japan. However, the country’s healthcare expenditure per capita is just 5% of that in the U.S. and 11% of that in Japan3, indicating huge growth potential. The country’s rising middle class and demand for quality healthcare from its growing and ageing urban population are set to drive long-term growth in the life sciences sector in the coming years. Over the past decade, mainland Chinese authorities have introduced a range of policies to encourage life sciences industry growth. Both China’s 14th Five-Year Plan and Healthy China 2030 policy identify life sciences as one of seven strategic growth pillars. The coming years will see authorities extend support for the development of proprietary technology and medical production capacity for the domestic market. Financial incentives including relocation costs, startup funding and tax subsidies are also being provided. R&D capability has been ramped up significantly, with over 1,600 new drugs in the discovery pipeline, the second

largest such number in Asia Pacific after Japan.4 Several of the country’s COVID-19 vaccines were recently approved for use by the World Health Organisation (WHO). While both national and provincial Chinese authorities have invested in the construction of life sciences hubs in tier 1 and tier 2 cities to foster industry development, the country’s major clusters remain concentrated in the YRD, Bohai Bay and GBA. Shanghai and Beijing are mainland China’s (and Asia Pacific’s) most competitive life sciences hubs, thanks to their strong manufacturing capacity, R&D capabilities and influx of venture capital. Shanghai’s port enables it to outperform in terms of the supply chain, while Beijing is reliant upon neighbouring cities for exports. CBRE has also identified several adjacent cities in the YRD such as Suzhou, Hangzhou and Nanjing; cities in Bohai Bay such as Shijiazhuang, Tianjin and Jinan; cities in the GBA such as Shenzhen and Guangzhou; and Wuhan and Chengdu as key life sciences hubs. Hong Kong SAR also has a role to play in supporting growth of the life sciences industry in the GBA by serving as a key location for fund raising.

LIFE SCIENCE CLUSTERS IN GREATER CHINA

P RIMARY L O CATIONS

SECONDARY LOCATIONS D

F E

C J

2.IVQIA – Top 10 Pharmaceutical Market Worldwide, 2019 3.World Health Organization 2018, Oxford Economics 4.Cortellis, Q1 2019 22

| 2021 ASIA PACIFIC LIFE SCIENCES

Suzhou

Shijiazhuang

Hangzhou

Guangzhou

Nanjing

Shenzhen

Tianjin

Wuhan

Jinan

Chengdu

Source: CBRE Research, June 2021

G R E AT E R C H I N A

SHANGHAI

RATING

MANUFACTURING

5 RATING

R&D

4 RATING

LOGISTICS

4 RATING

SALES

The output value of the biomedical manufacturing industry in Shanghai totalled RMB 132 billion in 2019, an increase of 7.3% y-o-y. The sector accounts for 4% of total industrial output. Zhangjiang district is focused on R&D and new pharmaceutical manufacturing, while science parks in Minhang district are dedicated to high-end drug manufacturing and animal vaccine production.

The city is home to ten medical colleges and advanced research institutes. Many local and international pharmaceuticals companies have established incubators in Shanghai to help facilitate drug development. In 2019, Johnson and Johnson opened its first regional incubator for life science startups in the city.

Shanghai boasts advanced infrastructure for handling pharmaceuticals products, with cold storage supply standing at just under 3.5 million sq. ft. as of H1 2020. Pudong International Airport hosts numerous certified local and international logistics companies capable of handling pharmaceutical products.

Sales of Chinese and Western medicines in Shanghai reached RMB 192 billion in 2019, a rise of 8.2% y-o-y. Western medicines accounted for more than 80% of total sales, growing by an average of 10% per annum over the past five years. Almost all major global life sciences companies have a sales function in the city.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

Appetite for expansion, upgrading and flight to quality remains healthy among domestic and multinational life sciences companies. However, many of the latter are currently adhering to global remote working policies.

•

Offices tend to be concentrated in core locations such as Nanjing West Road, People’s Square and Huihai Middle Road. Business parks in Zhangjiang and Caohejing are increasingly sought after by firms seeking to expand and establish headquarters functions.

•

Demand for laboratory space is increasing due to a stronger focus on R&D and biotechnology incubators.

| 2021 ASIA PACIFIC LIFE SCIENCES

INVESTMENT •

High specification R&D facilities are mostly owned by the government or joint-venture partnerships between pharmaceutical companies and government entities.

•

Investment opportunities lie in purchasing and then enhancing aged light industrial buildings in the Zhangjiang area. In 2020, Morgan Stanley acquired Medipharm Biotech Technology Park in Zhangjiang, and has since begun to upgrade the property.

•

Investors are advised to pay close attention to environmental standards and specific biosafety requirements for laboratory space.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

ZHANGJIANG HI-TECH PARK

THE ORIENTAL BEAUTY VALLEY LINGANG LIFE SCIENCE PARK

Mature cluster Emerging cluster

ZHANGJIANG HI-TECH PARK Leasable area*

THE ORIENTAL BEAUTY VALLEY

LINGANG LIFE SCIENCE PARK

Over 30 million sq. ft.

Approx. 25 million sq. ft. (core area, incl. planned but not completed GFA)

Over. 20 million sq. ft. (mostly planned but not completed GFA)

(Asking) Rent

R&D: RMB 10 – 20 per sq. ft. per month

Manufacturing: RMB 3.3 – 4.2 per sq. ft. per month

Manufacturing: Approx. RMB 4.2 per sq. ft. per month

Key life sciences tenants

GSK, J&J, Novartis, Pfizer, Roche, AstraZeneca, Amgen

Shanghai RASS, Yuanqi Bio, Hile, Shanghai Institute of Biological Products

Junshi Bioscience, Nhwa Pharmaceutical, Tellgen, Wuxi Apptech

Office, R&D lab, manufacturing

R&D lab, Manufacturing

Ownership

Mixed ownership including industry park operating entity (SOE), private developers / investors, owner occupiers.

Government incentives

For qualified companies: tax incentive, capex and rental subsidy, R&D subsidy, talent attraction policy

Types of facilities

* Including space used by industries other than life sciences Source: CBRE Research, June 2021

G R E AT E R C H I N A

BEIJING

RATING

MANUFACTURING

5 RATING

R&D

RATING

LOGISTICS

3 RATING

SALES

Beijing’s pharmaceutical industry continues to expand at a rapid rate, with the sector’s industrial production increasing by 9.4% y-o-y in 2020, eclipsing China’s overall growth rate of 5.9%. The city currently hosts more than 200 life sciences manufacturing facilities and is the largest national production base for COVID-19 vaccines.

Beijing is a major R&D hub for China’s pharmaceutical industry. Total R&D expenses reached RMB 3.3 trillion in 2019, with the city accounting for 10% of 2020’s national drug development pipeline. The Beijing Municipal Health Commission recently announced a raft of new policies to further enhance research capabilities and innovation. The city’s large number of medical graduates provide an ample talent pool.

Due to a shortage of sites for warehouse development, Beijing’s logistics market is dependent upon neighbouring satellite cities such as Tianjin and Langfang. The supply of high standard and cold storage facilities within the city is also very limited.

Pharmaceutical and healthcare industry sales in Beijing reached RMB 147.3 billion in the first three quarters of 2019, an increase of 11.5% y-o-y. Many international pharmaceutical companies such as Novartis, Bayer and MSD maintain offices in the city. Leading domestic companies with a large presence include BeiGene and Sinopharm.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

Robust investment in the life sciences sector is generating healthy occupier demand for office upgrading and flight to quality. Expansion by local life sciences companies is primarily in business parks.

•

International life sciences companies remain in cost saving mode, with some firms consolidating their office footprint.

•

Limited cold storage supply has led to a few life sciences companies converting standard leased warehouse space into high specification cold storage for use as medical distribution centres.

| 2021 ASIA PACIFIC LIFE SCIENCES

INVESTMENT •

Investment activity is limited as most properties are either owner-occupied or government leased facilities. Ownership restrictions apply to laboratory facilities granted to endusers, with such properties only permitted to be sold back to the government and prohibited from being disposed on the open market.

•

End-users can obtain land use rights from the government. Notable examples includes Bayer’s partnership with the government to expand its production for prescription drugs in the Economic and Technology Development Area.

•

Land availability for cold storage and modern logistics development is limited in Beijing. Investors are therefore advised to look for development opportunities in the panBeijing area, such as Langfang. Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS ZHONGGUANCUN LIFE SCIENCE PARK

BEIJING ECONOMIC AND TECHNOLOGY DEVELOPMENT AREA

Mature cluster Emerging cluster

DAXING BIO-MEDICAL INDUSTRIAL PARK

ZHONGGUANCUN LIFE SCIENCE PARK Leasable area (Asking) Rent

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

BEIJING ECONOMIC AND TECHNOLOGY DEVELOPMENT AREA

DAXING BIO-MEDICAL INDUSTRIAL PARK

Approx. 11 million sq. ft.

Approx. 2.2 million sq. ft. only for life science sector

Approx. 4.0 million sq. ft.

R&D: RMB 11 – 14 per sq. ft. per month

R&D: RMB 7 – 9 per sq. ft. per month

R&D: RMB 7- 8 per sq. ft. per month

BeiGene, Bestnovo, InnoCare Pharma, Berry Genomics

Bayer, FibroGen, domestic pharmaceutical companies

Beijing Biocytogen, Allgens Medical

Office, R&D lab

Office, R&D lab, manufacturing

Mixed ownership including industry park operating entity (SOE), owner occupiers, private developers / investors such as Zhongguancun Development Group

Mixed ownership including government granted land to enduser (e.g. Bayer), government (BDA Limited), industry park operating entity (SOE) and private developers such as Hongkun

Mixed ownership including industry park operating entity (SOE), private developers / investors, owner occupiers. Partnership between the government and pharmaceutical companies such as China Resources

For qualified companies: tax incentive, capex and rental subsidy, R&D subsidy, talent attraction policy

G R E AT E R C H I N A

HONG KONG SAR

RATING

MANUFACTURING

2 RATING

R&D

3 RATING

LOGISTICS

4 RATING

SALES

While the HKSAR government recently assigned a plot of land at Yuen Long Industrial Park for the development of a purpose-built manufacturing plant, it is not solely for life sciences use. Under the GBA scheme, Hong Kong SAR companies are encouraged to permit qualified pharmaceutical companies or medical device manufacturers in the GBA to produce pharmaceuticals, enabling production to be transferred to the GBA. Biomedical R&D is a priority area and is supported by government policies. The Hong Kong Science Park hosts advanced R&D facilities and can accommodate about 150 biomedical companies. The government also provides tax deductions for qualified R&D expenditure. The Lok Ma Chau Loop will be designated as a campus for the sector. The city’s airport, seaport and highways are modern and well maintained. Cold storage assets are available but modern purpose-built facilities specialised for pharmaceutical storage are limited. There are numerous certified 3PL companies handling logistics and deliveries of medical and pharmaceutical products and supporting external trade and exports to mainland China. Hong Kong is positioned as a regional sales office for the sale of medical products to local hospitals and clinics as well as a gateway to the mainland China market. Major global pharmaceutical companies such as Pfizer, MSD, Novartis, Roche and Teva Pharma all have offices in the city to market and sell generic drugs, Chinese medicines and medical devices.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

•

INVESTMENT

Life sciences companies are consolidating sales offices to • enhance efficiency as they continue to seek opportunities to control costs and CapEx in what remains a high-cost real estate market. • The adoption of remote working has enabled international drugs firms to adopt ABW with a high desk sharing ratio for sales staff (1:4 to 1:5). The healthcare sub-sector is displaying strong demand for medical office buildings. Their typical size requirement is relatively small at just 2,000 sq. ft. and below. Large tenants tend to be hospital clinics which can occupy multiple floors.

| 2021 ASIA PACIFIC LIFE SCIENCES

•

Acquiring R&D labs in Hong Kong SAR is challenging. The Science Park is owned by the government and not available for sale. Opportunities lie in industrial building conversions. However, there are strict requirements relating to building specifications including floor loading, power and water supply. Conversions can only be for laboratory testing use rather than for high-end R&D. Recent years have seen medical companies convert industrial buildings or acquire land for purpose-built medical facilities.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

LOK MA CHAU LOOP

SCIENCE PARK YUEN LONG INDUSTRIAL PARK

Mature cluster Emerging cluster

YUEN LONG INDUSTRIAL PARK

SCIENCE PARK

LOK MA CHAU LOOP

Leasable area

N/A

Approx. 4.3 million sq. ft.

Approx. 12.9 million sq. ft.

Rent

N/A

Office: HKD 23 – 25/sq. ft./month Lab: HKD 25 – 32/ sq. ft./month

Planning stage, probably beyond 2024

Bright Future, Fortune Pharma, Chiho-Tiande, EU Yan Sang

Vitargent, PuraPharm, Agamatrix, Infosense, Darenbiotech

N/A

Manufacturing

Office, R&D lab

Government granted land, buildto-suit

Government granted land

No specific incentives for life sciences

No incentives for life sciences but tax deductions for science and technology

No incentives for life sciences

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

J A PA N

TOKYO

RATING

MANUFACTURING

4 RATING

R&D

RATING

LOGISTICS

4 RATING

SALES

Most manufacturing facilities are owner-occupied by large pharmaceutical companies and are located outside Tokyo. A few domestic life sciences companies recently constructed industry 4.0 plants serving local demand and featuring cutting-edge technology and artificial intelligence to improve production efficiency. However, it remains challenging for small and medium sized companies or start-ups to find manufacturing facilities for lease within Japan. While Japanese companies own many patents for pharmaceutical and medical devices, growth is somewhat constrained by the limited availability of R&D laboratories for rent. Most laboratory facilities in Japan are owner-occupied or belong to the government and universities. The lease period for government laboratories is just five to seven years, while university facilities are only available for use by research partners.

Tokyo’s airport, seaport and highways are well developed but cold-storage facilities are rarely available for lease. Numerous Third-Party Logistics (3PL) companies are able to handle and deliver pharmaceutical products. These include Nippon Express, Mitsubishi Logistics, Suzuken and NRS Corporation.

Japan health expenditure accounted for around 11% of GDP in 2018 and is projected to increase further due to the country’s ageing population and advances in medical technology. Many international life sciences companies have operations in Japan. Local life sciences companies such as Takeda, Daiichi Sankyo and Chugai are increasingly involved in cross-border M&A, a trend that is boosting drug sales.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER

INVESTMENT

•

Corporate office requirements from larger life sciences firms are limited. Some firms are reducing their footprint by adopting remote working. Achieving greater flexibility within real estate portfolios is another key focus.

•

R&D space remains limited. Most such facilities are located around the Tokyo Bay Area or outside Tokyo. Despite pentup demand for R&D space, size requirements are small, at • around 1,000-3,000 sq. ft., mainly due to start-ups’ low rental affordability.

•

Selected life sciences companies are seeking cold and mixed storage space.

| 2021 ASIA PACIFIC LIFE SCIENCES

•

Japanese pharmaceutical companies tend to own their R&D and drug manufacturing facilities. Most firms are cash-rich and therefore under little pressure to sell. Although Takeda Pharmaceutical disposed of 21 properties in 2019, most assets were corporate offices and multifamily. The short supply of rental laboratory facilities has led to Mitsui Fudosan launching a rental laboratory business. This involves the construction of P2 level laboratory facilities on industrial sites. Investors are advised to explore partnership opportunities with local developers to develop rental lab or cold-storage facilities.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS (RENTAL LABS)

MITSUI LINK-LAB SHINKIBA KANAGAWA SCIENCE PARK

LIFE INNOVATION CENTRE

MITSUI LINK-LAB SHINKIBA

KANAGAWA SCIENCE PARK

KANAGAWA LIFE INNOVATION CENTRE

Leasable area

Approx. 81,100 sq. ft.

Approx. 27,450 sq .ft.

Approx. 172,200 sq. ft.

Rent

JPY 23,000 per tsubo

JPY 20,000 per tsubo

N/A

LIKE TODO Japan Pharma, Methuselah Corp., BrightPath Biotech.

Osaka Sanitary, Sysmex Corp., Tella Pharma, PharmaBio Corp.

Office, R&D lab

Mitsui Fudosan

Government joint venture with private companies including life insurance firms and REITs

Government joint venture with Daiwa House Industry

N/A

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

KOREA

SEOUL

RATING

MANUFACTURING

3 RATING

R&D

RATING

LOGISTICS

4 RATING

SALES

The total value of pharmaceutical production in Korea reached KRW 22.313 billion in 2019, up 5.7% y-o-y. The country’s pharmaceutical market has grown at an average annual rate of 7.1% over the past five years, well above the 2.4% registered by the overall manufacturing industry. Korean firms specialise in generic drug production. High labour costs are prompting global giants to consider shifting production to cheaper markets. In 2019, the Korean government unveiled its “Innovative Strategy on the Bio-health Industry” policy. The initiative aims to develop the bio-health industry as a key industry, along with semiconductors and automobiles. By 2025, the government plans to spend KRW 4 trillion to establish a big data platform and pursue new drug and medical device development. Pharmaceutical exports have registered double digit percentage growth per annum in recent years. Cold-storage is gaining traction among local and global logistics companies, with a domestic freight forwarder recently announcing plans to enter the pharmaceutical logistics market, and a global player in temperature-controlled packaging opening its first network station near Seoul. Other players such as CJ Logistics and Lotte Global Logistics are reviewing opportunities in related import and export businesses. Domestic pharmaceutical companies are establishing overseas production bases and hiring specialists as they seek to enter the global market. Global pharmaceutical companies who manufacture drugs in Korea are closing factories as they pivot to developing new drugs.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER

INVESTMENT

•

Several life sciences companies involved in recent M&A activity are consolidating and relocating their offices in the CBD and the YBD. Many such firms are achieving flight to quality by reducing their space requirements with the adoption of ABW.

•

After providing tax benefits and discounts to support space take-up in Pangyo 1st Techno Valley, the government has limited ownership to pre-sale contractors for 10 years from the date of registration, with a limited use restriction for 20 years from the date of completion.

•

The healthcare sub-sector has seen flight to quality activity, • with some Chinese medicine clinics taking up vacant Grade A space in the CBD.

•

Recent years have seen growing demand for R&D centres and laboratory space in Mogak and Greater Seoul. Domestic firms are also on the lookout for headquarters building acquisitions in emerging districts such as Pangyo.

These restrictions began to expire in 2020, meaning that owners are now free to buy and sell their assets. This is likely to lead to numerous properties coming onto the market in 2021, when buildings completed in 2011 will be permitted to be offered for sale.

| 2021 ASIA PACIFIC LIFE SCIENCES

•

In 2020, several pharmaceutical companies in Pangyo disposed of properties to recycle capital for future R&D.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

Mature cluster Emerging cluster

MAGOK R&D DISTRICT

PANGYO 1st TECHNO VALLEY

Land area Rent

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

PANGYO 1st TECHNO VALLEY

MAGOK R&D DISTRICT

Approx. 7.1 million sq. ft.

Approx. 12.1 million sq. ft.

KRW 1,405 – 1,686 per sq. ft. per month

KRW 843 – 1,124 per sq. ft. per month

SK Bio Pfarm, Samjin Pharmaceutical, Samyang Bio Pharm

LG Chem, Samjin Pharmaceutical, Bukwang, Kolon Life Science, Shinshin Pharmaceutical, Daewoong Pharmaceutical

Office, R&D lab

Built-to-suit headquarters (e.g. Samyang Bio Pharm); Mirae Asset AMC; ARA AM and Shinhan REIT. Owners are free to buy and sell assets after 2020.

Built-to-suit (e.g. LG Chem, Kolon Life Science); SH Corporation (leased facilities)

Tax incentives

SINGAPORE

RATING

MANUFACTURING

4 RATING

R&D

4 RATING

LOGISTICS

5 RATING

SALES

Singapore’s biomedical manufacturing output totalled SGD 33.56 billion in 2020, accounting for 10.8% of the country’s total manufacturing output. Singapore has invested in building relevant infrastructure and life sciences parks to attract life sciences companies as well as providing specialised infrastructure enabling the efficient set up of manufacturing operations for pharmaceutical, biologics and medical device manufacturers. Economic Development Board data show eight of the world’s top 10 pharmaceutical companies have facilities in Singapore. These firms manufacture four of the world’s top 10 drugs by global revenue. Human health and biomedical science research is a focus of the government’s SGD 25 billion R&D expenditure package confirmed for 2021 to 2025. A healthy research ecosystem featuring a large talent pool also continues to encourage investment from the private sector. Biopolis, a custom-built biomedical research hub located near the National University of Singapore, hosts many life sciences firms’ research activities. Singapore is a major exporter of pharmaceutical goods. In 2020, pharmaceutical exports amounted to SGD 18 billion, around 11% of total non-oil domestic exports. The country has the highest number of certified companies able to handle pharmaceutical products in Asia Pacific. Singapore is also home to several freight forwarders able to handle the transfer of pharmaceutical products.

Many major pharmaceutical companies have established regional headquarters in Singapore. Leading companies such as GlaxoSmithKline, MSD, Roche Johnson & Johnson and AbbVie all have commercial operations in the city-state.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

•

Large life sciences companies retain a strong presence in Singapore. In May of this year, BioNTech announced plans to establish its regional headquarters for Southeast Asia in Singapore. With support from the EDB, many large life sciences companies have established their own manufacturing facilities in Singapore. In April, Sanofi announced plans to build a new vaccine production centre. Occupiers' locational preferences are mixed, depending on the nature of their business functions. Some life sciences companies opt to locate marketing and sales functions in the CBD, while others consolidate commercial operations alongside R&D functions in business parks.

| 2021 ASIA PACIFIC LIFE SCIENCES

INVESTMENT •

New development opportunities are scarce, with only a few business park sites made available via the tender system.

•

Within the Biopolis development, Phase 6 is the latest site to be made available and was awarded to Ho Bee Land in 2020. Prior to that, the last land sale within Biopolis was in 2011, when Ascendas Land was awarded the Phase 5 tender.

•

With business parks tightly held by a handful of landlords, the number of existing business parks for sale is limited.

•

High specification industrial buildings with biomedical tenants are keenly sought after by investors.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

BIOPOLIS

TUAS BIOMEDICAL PARK

SINGAPORE SCIENCE PARK I & II

Mature cluster Emerging cluster

Leasable area Rent

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

SINGAPORE SCIENCE PARK I & II

BIOPOLIS

TUAS BIOMEDICAL PARK

Phase 1- 5: approx. 3.7 million sq. ft. Phase 6: approx.. 400,000 sq. ft.

Approx. 30.1 million sq. ft. of land area

Approx. 5.3 million sq. ft.

SGD 4.5 – 5.5 per sq. ft. per month

Land rent: SGD 1.05 – 1.37 per sq. ft. per annum

SGD 4.0 – 6.0 per sq. ft. per month

ES Cell International, Johns Hopkins, Vanda Pharmaceuticals

MSD, Novartis, Pfizer, GSK, Abbott, Roche, Wyeth, Lonza

Johnson & Johnson, Merck, Lonza, 10x Genomics

Office, R&D lab

Cold storage, manufacturing

Office, R&D lab

JTC, Ascendas REIT, Crescendas Group, P&G (build-to-suit), Ho Bee Land

JTC

CapitaLand Ltd, Ascendas REIT

N/A

Land allocation

N/A

MARKET OVERVIEW

INDIA

Often referred to as the world’s pharmacy, India caters to 62% of global vaccine demand and 20% of global generic drug requirements. The country boasts the world’s highest number of FDA-compliant pharma plants, with collaboration between Indian and global pharmaceutical giants surging since the onset of the pandemic amid a race to develop vaccines.

In terms of life sciences companies’ real estate presence, the southern cities of Bangalore and Hyderabad are the preferred locations, followed by cities such as Delhi-NCR, Chennai, Pune, Visakhapatnam, Ahmedabad, Vadodra, Ankleshwar and Valsad. Bangalore, the capital of Karnataka, is home to 60% of all major biotech firms in India, including 380 companies and 200 start-ups.

Recent examples include Covishield producer OxfordAstraZeneca partnering with Pune-based Serum Institute of India for wide-scale production. Elsewhere, Johnson & Johnson is working with Hyderabad-based Biological E. to scale up global vaccine production6. Additionally, Gilead, which manufactures the Remdesivir drug used for treating COVID-19, recently entered into multiple non-exclusive voluntary licensing agreements with several Indian pharmaceutical companies such as Cipla, Dr Reddy’s Laboratories and Hetero Labs to ramp-up global distribution.

The state of Telangana, where Hyderabad is located, manufactures about one third of the pharmaceutical products and vaccines supplied by India globally. The Genome Valley of Hyderabad currently hosts four out of the five leading global vaccine manufacturers. Visakhapatnam, located in Andhra Pradesh, also has an SEZ pharma cluster - Jawaharlal Nehru Pharma City (JNPC) - which is a base for prominent firms such as Torrent, Aurobindo Pharma and Dr Reddy’s Laboratories. The state of Gujarat, which houses life sciences clusters in cities such as Ahmedabad, Vadodara, Ankleshwar and Valsad, also accounts for about 40% of India’s pharmaceutical production and almost 30% of its exports. Most of these clusters are dedicated to manufacturing active pharmaceutical ingredients, formulations, bio-generics, vaccines and medical devices. The state also hosts over 700 companies with WHOGMP and 130 US FDA-approved units7.

LIFE SCIENCES CLUSTERS IN INDIA

P RIMARY L O CATIONS

C SECONDARY LOCATIONS

E F

D A

Visakhapatnam

Ahmedabad

Chennai

Vadodara

Delhi NCR

Ankleshwar

Pune

Valsad

5.Invest India 6.Media articles 7.GBR, 2020 35

| 2021 ASIA PACIFIC LIFE SCIENCES

Source: CBRE Research, June 2021

INDIA

BANGALORE

RATING

MANUFACTURING

RATING

R&D

3 RATING

LOGISTICS

3 RATING

SALES

India is the world’s largest provider of generic drugs. The state of Karnataka (where Bangalore is located) is well known for producing high-quality medicines including affordable generic medicines at a relatively low average production cost. 40% of pharmaceutical products manufactured in the state are exported globally. Karnataka currently has 221 formulation units and 74 bulk drug units, with standards at some manufacturing plants fulfilling international regulatory requirements. Bangalore is home to around 60% of all major biotech firms in India, including 380 companies and 200 start-ups. It hosts more than 35 clinical research organisations and key institutions such as the Indian Institute of Science and the Department of Agri-Biotechnology. The state of Karnataka encourages the establishment of R&D centres through the allocation of financial grants and incentives under its New Industrial Policy for 2020-2025. Bangalore has an international airport and a well-established intra and inter-state road network. The city’s proximity to ports in Chennai and Vishakhapatnam also helps expedite shipments. Major logistics challenges include cold chain management to maintain suitable temperatures during the delivery cycle, infrastructure gaps and costs. Various organised developers and operators are now evaluating land banks to build high quality grade A cold storage units. Karnataka contributes over 10% of India’s drug sales and 50% of national biotech revenue. Bangalore is also a preferred location for the India headquarters of various global and domestic life sciences companies such as Biocon, Sygene and Novo Nordisk.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER

INVESTMENT

•

Cost containment, consolidation and flexibility are a key • focus for life science companies. Many firms in the sector have adopted a wait and see approach towards their space requirements, while others are considering flexible workplace solutions.

•

2020 saw steady demand for manufacturing space from bulk drug manufacturers and medical device manufacturers.

•

As industrial land is directly sourced from the government, occupiers usually build their own industrial facilities. Cold storage and R&D units are typically housed within their own campuses or, in a few cases, outsourced to companies • such as Syngene in locations including Bommasandra, Jigani and Whitefield. | 2021 ASIA PACIFIC LIFE SCIENCES

Bengaluru Life Science Park at Electronics City is Bangalore’s major life sciences cluster. The first phase is currently under construction and is being developed under a public-private partnership with the government and local developer Labzone Corporation. Completion is expected by the end of 2022. Land allotment is on a long-term lease wherein the transfer of lease to another party is permitted only on a case-tocase basis. Post allocation of land by the state, any alternation of usage must be re-approved, or a NoObjection Certificate must be obtained. As it remains challenging for foreign investors to obtain land from the government for development, partnering with local groups for science park development is the major entry route for investors. Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

LABZONE BENGALURU LIFE SCIENCES PARK Mature facilities Emerging cluster SYNGENE PARK

BIOCON CAMPUS

LABZONE BENGALURU LIFE SCIENCES PARK Leasable area Rent

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

Approx. 9 million sq. ft. INR 45 – 55 per sq. ft. per month

Major international life sciences giants and leading local companies have committed to set up facilities upon completion of the park

Office, R&B laboratory, Manufacturing, Cold storage

A public-private partnership (PPP) formed by the government of Karnataka and private entity Labzone Corporation to set up the park; 60% of space in the park will be exclusively dedicated for a lease period of 64 years to a biotechnology cluster in PPP mode; built-to-suit model option available

No special tax incentives or subsidies in Labzone. Availability of public testing laboratories, common effluent treatment plant (CETP), a standalone power station, cold storage and other infrastructure

INDIA

HYDERABAD

RATING

MANUFACTURING

5 RATING

R&D

3 RATING

LOGISTICS

3 RATING

SALES

The state of Telangana, where Hyderabad is located, accounts for about onethird of India’s pharmaceutical production and global vaccine production. About 50% of India’s bulk drug exports are also produced by the state. Telangana has over 170 European Medicines Agency and over 70 FDA-approved manufacturing facilities. The Genome Valley of Hyderabad currently houses four out of the five leading global vaccine manufacturers. The Genome Valley is the largest and most vibrant R&D cluster in India, with six of the world’s top 10 R&D companies having facilities in the area. The valley also has supporting infrastructure for start-ups and hosts more than 20 life sciences and medtech incubators, which is the highest number of any city in India. The talent pool is sufficient to support generic drug discovery and research, with 45% of the area’s workforce employed in the sector. Pharmaceutical products account for 70% of exports handled by Hyderabad’s international airport, which is home to India’s first airport-based dedicated pharmaceutical zone with temperature-controlled life sciences cargo storage and handling facilities. Selected logistics providers such as Agility are investing in their own infrastructure to provide end-to-end solutions for cargo shipments.

Telangana has become a preferred location for global and domestic life sciences companies. Over 2,500 pharmaceutical companies have set up offices in the state, along with Andhra Pradesh, which is home to leading firms including Dr. Reddy’s Laboratories, Novartis, Gland Pharmaceuticals and Aurobindo Pharma.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

Most life sciences firms’ corporate offices are in Hyderabad’s Genome Valley. Several firms also have marketing and corporate offices in the Banjara and Jubilee Hills area. Most occupiers’ portfolio objectives are focused on cost saving and benchmarking with other life sciences firms.

•

Selected pharmaceutical companies are exploring smallscale expansion options in anticipation of rising orders for manufacturing drugs related to COVID-19 and critical medicines.

•

Similar to Bangalore, occupiers in Hyderabad usually build their own industrial facilities such as manufacturing / cold storage and R&D labs as industrial land is directly sourced from the government. | 2021 ASIA PACIFIC LIFE SCIENCES

INVESTMENT •

There have been only a small number of life science related real estate transactions in Hyderabad. The biggest deal was the disposal of Shapoorji Pallonji Biotech Park (renamed to MN Park) in Genome Valley to U.S. firm Alexandria in 2011. The property was subsequently sold to Lighthouse Canton, a Singapore-based asset manager, which is developing MN Synergy Square 2, in 2016.

•

Investors are advised to target disposals by developers that built the science park in Genome Valley. The major entry route for foreign investors is to form partnerships with the government for future phases of development in Genome Valley.

•

Post allocation of land by the state, any alternation of usage must be re-approved, or a No-Objection Certificate must be obtained. Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

GENOME VALLEY

BIOTECH PARK PHASE I IN TURKAPALLY

BIOTECH PARK PHASE III IN KARKAPATLA

BIOTECH PARK PHASE II EXTENSION IN LALGADI MALAKPET

Mature cluster

GENOME VALLEY – BIOTECH PARK PHASE I, II & EXTENSION AND III

Leasable area Rent

Key life sciences tenants Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

MN Park

IKP Knowledge Park

Approx. 1.2 million sq. ft.

Approx. 1.4 million sq. ft., including 84,000 sq. ft. of wet laboratory space

R&D: INR 60 – INR 70/ sq. ft./ month Office: INR 40 – INR 45/ sq. ft./ month

Novartis, Syngene, Alembic, Sai and other Indian pharma companies

AMRI, Dupont, Aizant, Daichi and other Indian pharma companies

Office, R&D lab, Manufacturing

LightHouse Canton Pte Ltd; government granted land

Jointly developed by ICICI Bank and the government of Telangana; government granted land

Financial incentives R&D subsidies Rent subsidies Research grants for product-specific development

MARKET OVERVIEW

AUSTRALIA Highly regarded on the international stage and established as an actively maturing market, Australia is emerging as a world-leading life sciences hub. The country’s life sciences industry has mainly been driven by advances in biotechnology. The industry has also been identified by the government as a sector of strategic priority, particularly in a post-COVID world, where strong financial and infrastructural support has and is being provided to nurture growth. The 2020-21 Federal Budget included a AUD 2 billion boost for the industry, in addition to further R&D tax incentives. The continual arrival of global life sciences companies is resulting in private sector partnerships with local Australian businesses and universities becoming more prominent, helping accelerate research innovations into commercial solutions. Australia’s world-class healthcare system and its established network of highly-regarded universities and research institutions are among the main reasons for the strong presence of global life sciences companies across the country. While Australia’s higher education sector underpins the country’s strength in discovery and pre-clinical research, opportunities remain in facilitating the growth of a local product development and manufacturing industry to complement this market-leading capability.

LIFE SCIENCES CLUSTERS IN AUSTRALIA

Developing this function will not only improve the country’s health, economy, and biosecurity, but also position Australia as a global centre of excellence across all facets of life sciences. Australia’s life sciences sector resides in the established clusters of Macquarie Park in New South Wales (NSW) and Parkville in Victoria. These hubs house university groups such as Macquarie University, Macquarie University Hospital, and University of Melbourne, and occupiers such as Johnson & Johnson, Novartis, AstraZeneca, CSIRO, and CSL. Elsewhere, Westmead, Randwick and Liverpool Health Precincts in NSW are rapidly expanding, with major tertiary hospitals anchoring research and education growth. Finally, Melbourne Airport Business Park will see the completion of new and large-scale facilities in the coming years, underscoring its potential as a cluster for life sciences companies. While large multinationals headline these precincts, the clustering of medical, university, and research anchors is fostering the growth and collaboration of local SMEs to create substantial economic and employment districts given greater economies of scale and occupier attractions. Emerging life science precincts are also developing in Australia’s other major cities, including Brisbane, Adelaide, Perth, and the Gold Coast, helping establish an interconnected network of clusters across the country.

P RIMARY L O CATIONS

SECONDARY LOCATIONS A B D

| 2021 ASIA PACIFIC LIFE SCIENCES

Brisbane

Adelaide

Gold Coast

Perth

Source: CBRE Research, June 2021

AUSTRALIA

SYDNEY

RATING

MANUFACTURING

3 RATING

R&D

Sydney possesses numerous quality existing facilities to manufacture drugs and vaccines locally. These include AstraZeneca’s manufacturing facility in North Ryde, GMP’s pharmaceutical plants and Vitex’s pharmaceutical plants.

NSW hosts the largest Biobank in the southern hemisphere. The biobank uses robotic technology to store and process millions of bio specimens for research. The co-location of major hospitals with university campuses and medical research institutes present significant opportunities for further R&D development.

The city has extensive airport and seaport facilities with supporting road and RATING

LOGISTICS

rail infrastructure, all of which are utilised by manufacturers’ outsourced logistics providers. The market is dominated by a global third-party-logistics provider which plans to build a 38,000 sq. m. facility in Western Sydney for pharmaceutical cold storage. In-market distribution is performed by specialised regional service providers.

NSW is home to Australia’s largest healthcare sector, representing 28% of the RATING

SALES

country’s entire output. The state also boasts world leading education and research institutions and hosts 30% of the country’s home-grown biotech companies. Global biopharmaceutical companies such as Novartis, Pfizer, AstraZeneca, Bayer and Eli Lilly also have a presence in Sydney.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER •

Life sciences companies are looking to optimise real estate portfolios for better efficiency. Other priorities include securing office space in core locations for sales and marketing functions.

•

The Westmead, Randwick and Liverpool health precincts are rapidly expanding, with major tertiary hospitals anchoring research and education growth.

•

Demand for modern manufacturing and warehouse facilities could rise as the government looks to increase manufacturing capacity to handle vaccine production.

| 2021 ASIA PACIFIC LIFE SCIENCES

INVESTMENT •

Macquarie Park is Sydney’s major submarket for tech and pharmaceutical companies. Recent years have seen several transactions involving pharmaceutical companies disposing of headquarters offices or temperature-controlled warehouses. These include Novartis’ sale of 54 Waterloo Road in 2019, Johnson & Johnson’s disposal of its headquarters in 2020, and Sigma Pharmaceutical’s sale of two cold storage facilities in the same year under a sale leaseback structure.

•

With a few international pharmaceutical companies continuing with portfolio rationalisation, investors are advised to explore disposal opportunities.

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCES CLUSTERS

MACQUARIE PARK

WESTMEAD

Mature cluster Emerging cluster

Leasable area Rent

Key life sciences tenants

Types of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

MACQUARIE PARK

WESTMEAD

Approx. . 9.8 million sq. ft.

Approx. 4.3 million sq. ft.

AUD 3.0 – AUD 3.5 per sq. ft. per month

N/A

Novartis, MSD, Johnson & Johnson, Merck, AstraZeneca, CSIRO and Cochlear

University of Sydney, Western Sydney University, Westmead Hospital

Office, R&D lab, Manufacturing

Office, R&D lab

Goodman , Stockland, AIMS APAC REIT (AA REIT), Keppel Capital, Ascendas

Government and universities; Leased facilities, built to suit, owner-occupied

Tax incentives R&D subsidies

AUSTRALIA

MELBOURNE

Melbourne has a global reputation as a hub for the innovative and advanced RATING

MANUFACTURING

4 RATING

R&D

4 RATING

LOGISTICS

4 RATING

SALES

manufacturing of pharmaceutical and medical technology products. Quality existing facilities already in place are enabling AstraZeneca in association with Seqirus (CSL) to manufacture its COVID-19 vaccines locally. A major new biotech manufacturing facility developed by CSL will commence operations in 2026 at the Melbourne Airport Business Park. Melbourne is a leading global biotechnology hub and home to two of the world’s top universities for biomedical research. One of these is ranked as the second-best university for pharmaceutical sciences worldwide. Thanks to its strong R&D infrastructure and advanced manufacturing expertise, the city attracts more than 40% of national medical funding. Established air and seaport facilities, including road and rail infrastructure, serve a strong transportation and distribution network. This year will see a global third-partylogistics provider open four new warehouse facilities in Melbourne. Several thirdparty-logistics providers are expanding cold chain pharmaceutical logistics services in the city. More than half of all ASX-listed life sciences companies are based in Melbourne, which is home to over 40% of Australia’s biomedical researchers. Melbourne’s strong positioning as an Asia Pacific gateway for industry collaboration and excellence make it a much sought-after destination for global pharmaceutical companies.

LIFE SCIENCES OCCUPIER AND INVESTMENT ACTIVITY OCCUPIER

INVESTMENT

•

Life sciences companies are looking to optimise real estate portfolios to improve efficiency. Some firms are securing office space in core locations for sales and marketing functions.

•

Parkville is the major life sciences cluster in Melbourne. Buildings in the area are mainly purpose-built facilities developed by the government, universities and hospitals for R&D.

•

With manufacturing capacity needing to be increased to accommodate locally produced vaccines, demand for modern manufacturing and warehouse facilities in Melbourne is likely to rise in the coming years.

•

As most R&D facilities are owner-occupied, investment activity is limited. Transactions are unlikely to occur unless they involve capital from pharmaceutical companies and higher education funds.

•

Recent relocations include a global life sciences company shifting its sterile injectables manufacturing functions from Perth to Melbourne.

| 2021 ASIA PACIFIC LIFE SCIENCES

Source: CBRE Research, June 2021

MAJOR LIFE SCIENCE CLUSTERS

MELBOURNE AIRPORT BUSINESS PARK

PARKVILLE (Melbourne Biomedical Precinct)

Mature cluster

FISHERMANS BEND

Leaseable area Rent

Key life science tenants

Type of facilities

Ownership

Government incentives

Source: CBRE Research, June 2021

Emerging facilities

PARKVILLE

MELBOURNE AIRPORT BUSINESS PARK

FISHERMANS BEND

N/A

AUD 3.0 – AUD 3.5 per sq. ft. per month

N/A

CSL Behring, Mesoblast, Starpharma, CSIRO, University of Melbourne, Royal Melbourne Hospital

CSL

N/A

Office, R&D lab, Manufacturing, Cold storage

Biotech manufacturing facility

Office, R&D lab, Manufacturing

PDG Corporation (built-to-suit); Leased facilities, Built to suit, Owner-occupied

Australia Pacific Airports Corporation (leasehold)

Various entities

Tax incentives R&D subsidies

ADVISORY & TRANSACTION SERVICES CONTACTS Regional Contacts Manish Kashyap Regional MD, Head of Advisory & Transaction Services, APAC Global Head of Advisory & Transaction Services – Agile manish.kashyap@cbre.com

Paul Hubbard-Brown Managing Director, Asia Pacific Paul.HubbardBrown@cbre.com.hk

Rohini Saluja Managing Director, Asia Pacific Rohini.saluja@cbre.com

Evvanna Chua Senior Director, Asia Pacific Sector Lead of Life Science Vertical, Asia Pacific Evvanna.chua@cbre.com

Individual Market Contacts GREATER CHINA – SHANGHAI

KOREA - SEOUL

Fion Zhang

Andy Park

fion.zhang@cbre.com.cn

andy.park@cbrekorea.com

GREATER CHINA – BEIJING Christina Liu christina.liu@cbre.com

SINGAPORE David McKellar david.mckellar@cbre.com.sg

Rayman Zhang rayman.zhang@cbre.com.cn GREATER CHINA – HONG KONG SAR

INDIA

Ada Fung

Ram Chandnani

ada.fung@cbre.com.hk

ram.chandnani@cbre.co.in

Japan – TOKYO

AUSTRALIA

Charles Kelly

David Keenan

charles.kelly@cbre.co.jp

david.keenan@cbre.com

| 2021 ASIA PACIFIC LIFE SCIENCES

CAPITAL MARKETS CONTACTS Regional Contacts Greg Hyland Head of Capital Markets, APAC Greg.hyland@cbre.com Tom Moffat Head of Capital Markets, Asia Tom.moffat@cbre.com.hk Mark Coster Head of Capital Markets, Pacific Mark.coster@cbre.com

Individual Market Contacts GREATER CHINA – SHANGHAI

KOREA - SEOUL

Candice Wang

Sean Choi

candice.wang@cbre.com.cn

sean.choi@cbre.com

GREATER CHINA – BEIJING

SINGAPORE

Grant Ji

Michael Tay

grant.ji@cbre.com.cn

michael.tay@cbre.com

GREATER CHINA – HONG KONG SAR

INDIA

Jonathan Chau

Nikhil Bhatia

jonathan.chau@cbre.com

nikhil.bhatia@cbre.co.in

Reeves Yan

Gaurav Kumar

Reeves.yan@cbre.com

Gaurav.Kumar@cbre.co.in

Japan – TOKYO

AUSTRALIA

Takashi Tsuji

Mark Coster Mark.coster@cbre.com

takashi.tsuji@cbre.com Yasunobu Uehara yasunobu uehara@cbre.co.jp

Sandro Peluso Sandro.peluso@cbre.com.au Jimmy Tat Jimmy.tat@cbre.com

| 2021 ASIA PACIFIC LIFE SCIENCES

CONTACTS For more information about this regional major report, please contact:

RESEARCH

ADVISORY & TRAN SACTION SERVICES

Henry Chin, Ph.D. Global Head of Investor Thought Leadership Head of Research, Asia Pacific Henry.chin@cbre.com.hk

Manish Kashyap Regional MD, Head of Advisory & Transaction Services, APAC Global Head of Advisory & Transaction Services – Agile Manish.kashyap@cbre.com

Ada Choi, CFA Head of Occupier Research, Asia Pacific Head of Data Intelligence and Management, Asia Pacific Ada.choi@cbre.com.hk

Rohini Saluja Managing Director, Asia Pacific Rohini.saluja@cbre.com

Cynthia Chan Director, Asia Pacific Cynthia.chan@cbre.com.hk Leo Chung, CFA Director, Asia Pacific Leo.chung@cbre.com.hk

Evvanna Chua Senior Director, Asia Pacific Sector Lead of Life Science Vertical, Asia Pacific Evvanna.chua@cbre.com

C A P I TA L M A R K E T S Greg Hyland Head of Capital Markets, APAC Greg.hyland@cbre.com

2021 ASIA PACIFIC LIFE SCIENCES REPORT 2021

CBRE RESEARCH This report was prepared by the CBRE Asia Pacific Research Team, which forms part of CBRE Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate. All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and professionals, and is not to be used or considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on information in this publication. To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at reports www.cbre.com/research-and-reports

| 2021 ASIA PACIFIC LIFE SCIENCES