Life science property sector in good health as big players step up

The biggest listed and private developers are staking their claim in life sciences and medical property, even as parts of the sector struggle.

The Herston Quarter in Brisbane, which is being developed by Australian Unity, is showing the way for healthcare precincts.

The healthcare and life sciences property sector could more than double in value by 2028, hitting about $12.1bn projects in just three years as capital chases the hot area.

While some traditional property sectors have cooled, life ­sciences deals are on the rise and medical real estate is tipped to overcome the potential fallout from the major private hospital operator Healthscope going into administration.

Big players include Stockland, which is active at Sydney’s Macquarie Park, and Lendlease, which has a joint venture with Warburg Pincus, as well as infrastructure players such as Plenary.

Consultant M3 Property said the healthcare and life sciences sector had already grown 43 per cent since 2019 and was now one of the most resilient asset classes.

“This sector has moved from niche to necessity for institutional and private investors,” M3 Property director Mitchell Enright said. “Healthcare and life sciences precincts are now among the most investment-ready, innovation-driven parts of Australia’s commercial property market, with a strong growth runway backed by real demographic, clinical and economic trends.”

The sector has drawn in hospitals, universities, research institutes, aged care, health, and even residential players. There are around 27 major precincts in operation or under development, with Melbourne, Sydney and southeast Queensland leading the field.

A combination of Australia’s global reputation for IP protection, high rankings in research output and government support, including initiatives like the $22bn Medical Research Future Fund, the $750m Clinical Trials Activity Initiative, and the $1.5bn National Reconstruction Fund, have bolstered the area.

“The precinct model is a perfect fit for Australia,” Mr Enright said. “We’re globally recognised for healthcare research and innovation, and these hubs bring together all the key players in one place. This model not only delivers better care, it reduces travel burdens, supports local jobs, and represents a standout story to international investors looking to back science-led, impact-focused infrastructure.”

The Sunshine Coast Health Precinct is Australia’s largest health infrastructure project. Picture: Patrick Woods

In Melbourne, the Victorian government and University of Melbourne are investing $6bn to expand the Melbourne Biomedical Precinct. Other deals include the Dexus Healthcare Property Fund paying $138.7m for part of Monash University’s Parkville campus in 2021. ISPT and HESTA also partnered to acquire a 50-year ground lease and build a $140m 12-storey medical office tower in the St Vincent’s Hospital campus in Fitzroy.

In Sydney the Camperdown Health and Life Sciences Hub is currently being transformed by a $585m ISPT and Australian Retirement Trust development and the $780m Sydney Biomedical Accelerator. In 2022, ISPT, HESTA, UniSuper and Plenary Group signed a partnership agreement with the University of NSW to develop a $600m Health Translation Hub in the Randwick Health and Innovation Precinct

In southeast Queensland, six precincts are growing the region’s contribution to the sector. Some of these include the $5bn Sunshine Coast Health Precinct, which is Australia’s largest health infrastructure project, the Boggo Road Innovation Precinct, where a translational research hub in Brisbane co-located with the Princess Alexandra Hospital, and Brisbane’s Herston Health Precinct, home to over 30 hospital, research and other facilities.

There is still a limited supply of purpose-built facilities, and yields between 4.75 per cent and 5.5 per cent, with institutional investor interest increasing year-on-year.

While challenges remain in the form of rising construction costs and even the prospect of further private hospital closures, many traditional asset classes face ongoing volatility and softening yields.

“This isn’t just another hot market,” Mr Enright said.

“The sector’s resilience, long-term fundamentals and alignment with national priorities make it a critical piece of Australia’s property and innovation future.”

Originally published as Life science property sector in good health as big players step up