Chapter 4 – White Paper “Life Science Real Estate – A New Asset Class in the Institutional Portfolio”
Asset Management in Practice – Operational Excellence as the Key
With the right choice of location and a suitable building, the foundation for a successful life science investment is laid. However, the actual added value is only created during ongoing operation.
In this asset class in particular, it is not the initial investment decision that determines long-term success, but the quality of asset management. While the location and building define the framework, performance is created – or lost – in everyday operations.
From stable operation to the phase of increased complexity
Many life science properties – similar to other commercial properties – go through clearly distinguishable phases of life. An initial stabilization with predictable cash flows is often followed by a phase in which the framework conditions change fundamentally.
Leases expire or are being renegotiated. Users are growing, changing their research processes or needing different technical requirements. At the same time, the requirements for energy efficiency, ESG compliance and technical performance are increasing. In addition, there is increasing competition within established clusters.
This phase is not an exceptional case, but a structural component of the life cycle. However, it is operationally much more demanding than stable regular operation.
Asset management as a core operational function
In life science real estate, it is not enough to manage existing structures. Asset management becomes an active control function that intervenes deeply in the use and further development of the property.
Spaces must be further developed in line with the requirements of tenants. Technical adjustments and modernisations must be planned, prioritised and implemented. ESG measures must not be considered in isolation, but integrated into ongoing operations. At the same time, cash flows must be stabilised, leasing potential leveraged and the property actively positioned in the market.
These tasks are not sequential, but intertwined. Decisions on technical investments influence rentability. Tenant requirements have an impact on CAPEX planning and ESG measures. Market positioning and building strategy must be continuously coordinated.
The tenant as a strategic partner
Life science tenants are fundamentally different from classic office tenants. They often invest significantly in their space themselves, are involved in research processes and pursue long-term development strategies. Location regret is significantly higher.
The relationship between owner and tenant is therefore closer and less standardised.
In this context, successful asset management means:
- Understand tenants’ business models
- Identify their growth and development plans at an early stage
- Developing areas together
- Build long-term partnerships
This proximity is not a “nice-to-have”, but crucial for the stability of cash flows and the future viability of the property.
Operational intensity instead of routine
The requirements described above lead to a significantly higher operational intensity than in many classic asset classes. Particularly in phases of transformation, the management effort increases significantly – for example, in the event of major tenant changes, technical repositioning or adjustments within existing rental space.
In practice, this often creates a structural area of tension: individual assets require intensive support, while entire portfolios have to be managed at the same time.
This parallelism can lead to necessary measures being delayed or not being implemented with the necessary depth. However, it is precisely in these phases that it is decided whether a property gains relevance or loses market quality.
Focus as a success factor
Successful asset management in this asset class therefore requires not only expertise, but also targeted focus.
In operationally demanding phases, it often makes sense to temporarily bundle resources and to operate the management of individual assets with increased intensity.
The difference between average and above-average performance often arises precisely in these phases of increased attention.
Repositioning as an integral part
An essential part of this operational work is the further development of existing properties.
Many life science properties – especially those that were not originally designed for this use or whose technical equipment is no longer up to date – need to be actively adapted.
This evolution includes:
- Technical modernization and retrofitting
- Adaptation of floor plans and usage concepts
- Integration of ESG measures
- as well as the strategic repositioning in the market
This is not about selective optimizations, but about a structured transformation with a clearly defined target state.
Local presence as a prerequisite
The operational depth required for life science real estate cannot be controlled from a distance.
Proximity to the market is crucial: direct exchange with tenants, close cooperation with technical and operational partners, understanding of local regulatory frameworks and access to networks within the cluster.
Especially in highly specialised markets, these factors are often decisive for the success of lettings, conversions and strategic measures.
Conclusion: Value is created in the transition phase
Life Science Real Estate shows particularly clearly that real estate is not static assets. It is continuously evolving – or losing relevance.
The decisive moments of value creation do not arise in stable operation, but in the phases of increased complexity: where decisions are made about investments, use and positioning.
Asset management is therefore not a supporting process in this asset class, but the central lever for value development.
For institutional investors, this means:
The long-term success of a life science investment depends to a large extent on whether it is possible to actively manage these operational phases – with the necessary depth, speed and focus.
