Key Takeaways
- • Savills data show UK venture capital funding hit £2B in Q2 2026, a 135% increase on Q1 and double the rolling five-year quarterly average, but £1.6B of that went to a single company, Isomorphic Labs.
- • Golden triangle life sciences leasing totaled 175K SF in Q2, 8% below the five-year rolling average, indicating the VC rebound is not reaching lab-space occupiers.
- • Pioneer Group's Harry Pickering said the latest VC increase "necessarily hasn't helped that grassroots level as much as we would like," and that parts of the lab real estate market are "effectively dormant."
- • Lab space built during the 2021-2022 development boom was aimed at smaller biotech firms and is poorly suited to current AI-driven demand.
- • Belgrove House in King's Cross, a 250K SF building originally developed for Merck, is in talks to be leased by Microsoft for 200K SF as its UK headquarters.
Summary
UK life sciences real estate grew in the years around the pandemic on venture capital funding, which seeded startups and fueled demand for lab space. That funding fell sharply as interest rates rose from 2022 onward, and leasing levels dropped accordingly. Venture capital is now recovering, with Savills reporting that VC funding reached £2B in the second quarter, a 135% increase on the first quarter and double the rolling five-year quarterly average, according to the original Bisnow report.
The rebound, however, is concentrated. £1.6B of the second-quarter total went to Isomorphic Labs, the DeepMind spinout focused on AI-driven drug discovery. Pioneer Group Head of UK Investment Harry Pickering told Bisnow's UK Science and Technology Real Estate Annual Conference that the increase "necessarily hasn't helped that grassroots level as much as we would like." The shift reflects the broader pull of artificial intelligence on capital and talent, and it leaves developers and owners of lab-led schemes still waiting to fill vacant space. Golden triangle life sciences leasing reached 175K SF in Q2, 8% below the five-year rolling average.
The mismatch is structural. Much of the lab space delivered in the 2021-2022 development boom was designed for smaller biotech and drug discovery companies and is not suited to current demand. Pickering said parts of the market are "effectively dormant" and "are going to have to adapt." Adaptation is slow, and occupiers have ample choice given elevated vacancy. Build costs are high and values are down, so few firms have appetite for speculative development, and it is hard to predict where demand will emerge.
Location remains decisive. Several buildings in King's Cross and Euston's knowledge quarter, built to serve lab demand, have been leased by AI and technology firms. The clearest example is Belgrove House in King's Cross, developed by private family firm Precis. The 250K SF building was originally developed to shell and core for Merck as its UK headquarters, but Merck withdrew its investment last year amid a dispute with the UK government over drug pricing. Microsoft is now in talks to lease 200K SF of the building as its UK headquarters, according to the report. Pickering noted that well-located buildings with the right floor plates and flexibility are attracting talent and companies.
The rebound, however, is concentrated. £1.6B of the second-quarter total went to Isomorphic Labs, the DeepMind spinout focused on AI-driven drug discovery. Pioneer Group Head of UK Investment Harry Pickering told Bisnow's UK Science and Technology Real Estate Annual Conference that the increase "necessarily hasn't helped that grassroots level as much as we would like." The shift reflects the broader pull of artificial intelligence on capital and talent, and it leaves developers and owners of lab-led schemes still waiting to fill vacant space. Golden triangle life sciences leasing reached 175K SF in Q2, 8% below the five-year rolling average.
The mismatch is structural. Much of the lab space delivered in the 2021-2022 development boom was designed for smaller biotech and drug discovery companies and is not suited to current demand. Pickering said parts of the market are "effectively dormant" and "are going to have to adapt." Adaptation is slow, and occupiers have ample choice given elevated vacancy. Build costs are high and values are down, so few firms have appetite for speculative development, and it is hard to predict where demand will emerge.
Location remains decisive. Several buildings in King's Cross and Euston's knowledge quarter, built to serve lab demand, have been leased by AI and technology firms. The clearest example is Belgrove House in King's Cross, developed by private family firm Precis. The 250K SF building was originally developed to shell and core for Merck as its UK headquarters, but Merck withdrew its investment last year amid a dispute with the UK government over drug pricing. Microsoft is now in talks to lease 200K SF of the building as its UK headquarters, according to the report. Pickering noted that well-located buildings with the right floor plates and flexibility are attracting talent and companies.
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