Europe's $48bn pharma R&D strong despite US and China shift

New analysis from JLL reveals that Europe’s life sciences sector maintains a strong structural foundation in corporate R&D spending, alongside robust pharmaceutical and biotech stock performance. However, despite this resilience, a combination of shifting global dynamics, regulatory complexities, and clinical trial bottlenecks is starting to impact the region’s long-term competitiveness against the US and China.

According to JLL’s EMEA 2026 Life Sciences Industry & Cluster Report, four of the 10 largest pharmaceutical companies by R&D spend globally are headquartered in Europe: Roche, AstraZeneca, Novartis, and Sanofi. Together, these four giants spent a combined $48 billion on R&D in 2025, more than three times the total venture capital ($14.6 billion) raised across the entire European life sciences sector last year. This expenditure, rather than venture capital, remains the primary engine driving demand for physical laboratory space, innovation hubs, and specialised real estate across the region.

JLL’s research, however, indicates that Europe’s share of global Phase I-III clinical trial starts has fallen, from 35% in 2009 to 21% in 2024. China’s share has risen to 30% over the same period, surpassing Europe.

Clinical trial shifts reflect capacity constraints, regulatory inefficiencies, and evolving drug pricing frameworks. US policy adjustments are encouraging pharmaceutical companies to be increasingly selective with their capital allocation. The UK’s April 2026 agreement to boost domestic healthcare spending, securing zero US tariffs on UK pharmaceuticals, exemplifies how global policies directly impact local markets.

"The scale of R&D capital originating in Europe remains substantial, but the investment infrastructure required to execute these programmes is increasingly becoming globalised," said Alexander Nuyken EMEA Head of Life Sciences, Leasing Advisory at JLL. "When Europe’s share of global clinical trials falls by more than a third in fifteen years, it sends a clear signal. Regional markets must create highly efficient research environments to keep corporate investment local.”

Maturing Chinese biotech firms are transitioning from partners to local occupiers. Asymchem acquired Pfizer's former Sandwich site, while Pharmaron operates nearly 80,000 sqm across four UK sites. Meanwhile, Western pharma increasingly licenses therapies from China's pipeline, driving additional European real estate needs across development, manufacturing, and distribution.

Despite these headwinds, the sector is entering a renewed, more measured growth cycle, heavily influenced by the rapid integration of AI across the drug discovery pipeline which is redrawing the map for real estate requirements.

AI-driven drug discovery accounted for 20% of all European VC funding in 2025 and this technological pivot is expanding the mix of space requirements, with high-specification, tech-ready 'dry labs' and office spaces increasingly complementing traditional wet labs.

This places a premium on locations combining AI talent, world-leading universities, and advanced infrastructure. London, Paris, Oxford, Cambridge, and Zurich are best positioned.

As the sector transitions from a period of oversupply to one of strategic consolidation, investor sentiment is shifting from new development toward income-producing assets in established hubs. Transactional volume has contracted as investors adopt more selective approaches, focusing on properties with proven tenant bases and long-term income streams in supply-constrained markets across continental Europe. With yields trending upward and a widening bid-ask spread, successful investors are prioritising active asset management-leasing up properties in prime locations and expanding tenant profiles beyond traditional life sciences to adjacent innovation sectors such as advanced materials, robotics, and computational sciences. Joint ventures in high-growth, supply-constrained markets are expected to replace speculative development as the dominant investment strategy.

"We are seeing a profound evolution in what occupiers demand," said Juan Pablo Negus, Industry Head for EMEA Life Sciences Accounts. "The life sciences market is moving past its historic oversupply phase and entering a period of refinement. Proximity to world-class academic institutions remains the primary driver for location strategies. Investors who focus on premium, 'All-Rounder' hubs like London, Paris, and Munich, which offer both deep R&D talent and robust manufacturing capabilities, will be best positioned to capture this next wave of demand. The opportunity lies in proven assets within ecosystems that can sustain long-term tenant growth and cross-sector innovation."