Global interest in the life sciences showed significant increase in recent years. With Australia boasting one of the largest life science sectors in the Southern hemisphere, our local industry witnessed a remarkable 40% growth since 2021, emerging as a highly sought-after destination for investment in life science real estate, which includes private hospitals, medical precincts, innovation districts, laboratories and residential aged care facilities.
This $250 billon dollar local industry is home to 2,600 organisations and the continual growth is underpinned by a world-class medical research sector nurtured in internationally respected universities, hospitals, and medical research institutes. The industry is further boosted by significant government support, which includes a research and development tax offset of up to 43.5% and more than A$21.5 billion in support funds for the life sciences, which would include funding for facilities.
With an aging population and rising cases of chronic diseases such as heart disease and diabetes, the urgency for advancements in life sciences and healthcare solutions has never been greater, positioning Australia as an enticing hub for investment, development, and the conversion of existing properties into life science real estate.
These facilities can include laboratories and research facilities that are furnished with advanced scientific equipment and infrastructure to support research in areas such a genomics, medical discovery and biomedical engineering.
Manufacturing and production facilities designed to meet stringent regulatory requirements for the production of pharmaceuticals, biologics, medical devices and other healthcare products are also sought after life science real estate.
Creating collaborative spaces like innovation hubs or biotechnology parks that bring together scientists, entrepreneurs, investors and academic institutions to foster innovation, collaboration and knowledge are also excellent examples of rejuvenating existing property into life science real estate.
Life science real estate conversion projects can take various forms, depending on the type of property and the specific needs of the life science tenants. Some common examples include:
Office buildings:
Vacant or underutilised office space can be converted into modern laboratories equipped with specialised equipment, biosafety features, and collaborative workspaces. This transformation often involves significant upgrades to infrastructure, HVAC systems, and safety protocols to meet industry standards.
Industrial warehouse spaces:
Large industrial buildings or warehouses can be repurposed into biomanufacturing facilities or research labs for biotech and pharmaceutical companies. These projects may require extensive renovations to accommodate regulatory compliant cleanrooms with controlled air quality and regulated humidity for cell culture, fermentation, purification and other bioprocessing operations.
Retail and commercial spaces:
Former retail or commercial properties may be transformed into incubator spaces, shared labs, or start-up hubs for emerging life science companies. These conversions focus on creating collaborative environments with access to mentorship and shared amenities.
Historic buildings:
Adaptive reuse of historic buildings or heritage sites can preserve architectural heritage while providing modern laboratories or other life science facilities.
Converting existing property into life science real estate requires strict adherence to regulatory standards like building codes, biosafety guidelines, and environmental regulations. Older buildings may need significant upgrades to infrastructure, utilities, and HVAC systems to meet the specialised needs of life science tenants and investing in cutting-edge equipment is vital for operational efficiency and industry compliance.
Despite these challenges the life science real estate conversion trend is expected to continue and expand as the demand for innovative research and development spaces grows.
Key stakeholders, including real estate developers, investors, life science organisations, and local governments, play a vital role in shaping the future of these conversion projects. These projects not only contribute to the growth and sustainability of the life sciences industry, but also drive economic development, job creation, and technological innovation while exemplifying the spirit of adaptive reuse that will solve the increasing demand for state of the art research and development facilities.
Collaboration with experienced professionals including architects, engineers, quantity surveyors and other consultants is crucial for navigating the complexities of life science real estate conversion.
Adaptive reuse conversion to life science real estate will hold significant depreciation value. Below is a case study of a substantially renovated warehouse of close to 460sqm that was converted into a life science centre with various office spaces, breakout rooms, a staff kitchen, laboratories and various utility rooms.
Table 1. An example a life science real estate conversion from warehouse to research space.
*The Depreciation deductions in this table were calculated using the diminishing value method.
With significant depreciation benefits available on the conversion of an existing property for adaptive reuse, we recommend contacting a specialist quantity surveyor like BMT Tax Depreciation for further advice or to request a quote on your life science real estate conversion.