The Economist - USA (2021-11-13)

68 Business TheEconomistNovember13th 2021

life­sciencesfloorspaceinBritain,invest­

ing  over  $1bnintwonewsites.Sharesof

life­science reitsarebooming.

By  now,  labspaceisgrowinghardto

come  by.  InBoston,wheremuchofitin

America is held,lessthan5%oflabswere

available in thethirdquarter. IntheGolden

Triangle, as theareabetweenLondon,Ox­

ford  and  Cambridgeisknown, premises

have  run  out. The Harwell life­sciences

campus  nearOxfordwilladd1.5msquare

feet  over  thenextsevenyearstomeetde­

mand—equivalenttothree­quartersofall

the office spaceLondon’sfinancialdistrict

will add this year.ChrisWalters,directorat

jll, estimatesunmetdemandforlabspace

in  and  aroundCambridge at1msquare

feet—equivalenttonearlya quarterofre­

tail space onLondon’sOxfordStreet.

Where  marketsaretight,participants

will  seek  to  expandsupply.Inthecaseof

sci­tech  property that is harder than it

sounds.  Constructingnewphonetowers

means navigatingstrictplanninglawsand

nimbys.  Newdatacentresneedlandwith

access to cheapelectricityandhigh­speed

internet. Life­sciencesfirmsliketocluster

around  top universities and academic

medical centresthatprovidethechemists,

microbiologists and other experts that

populate theirlabs.Onefixisfindingsec­

ondary  locations.CitieslikeLosAngeles,

which is fairlyneartheSanFranciscoBay

Area,  and  Pittsburgh,home to Carnegie

Mellon, a universityknownforprowessin

artificial  intelligence,areattractingstart­

ups awash withcapital.InBritain,life­sci­

ences  hubs  arespringingupinthenorth,

where pharmaceuticalgiantslikeAstraZe­

neca and gskhavemanufacturingsites.

Another  remedyisconvertingexisting

offices  and  industrialspace.BostonProp­

erties,  one of America’s largest office

reits, says itcanconvert5msquarefeetof

conventionalsitesandbuildingsintolab­

oratories. It isnoeasyprocess,forlabsare

complex  spaces governed by biosafety

rules. They needfourtimestheamountof

air that officesdo.WaitinglistsinLondon

for  “wet”  labs,facilitiesinwhichdanger­

ous  chemicalsandotherhazardoussub­

stances  can  behandled,arelengthening­

. But propertyinvestorsaregametotry.In
New  York  conversionscouldalmostdou­
ble  the  city’slabspaceforrent,according
to Newmark,a real­estateadvisoryfirm.
Even  empty shops are being repur­
posed. Savills,a Britishpropertyfirm,reck­
ons London hasatleast1.8msquarefeetof
retail  propertythatcouldberefashioned
into  laboratories. Shops’ high ceilings
mean  plenty of room for high­perfor­
mance  ventilation, and service lifts for
moving dangerousmaterials.It willdoubt­
less take yearsforsupplytocatchupwith
demand. Butasthelocusofworkandcom­
merce  moves, real­estate investors are
shifting withit.n

Chinaandthepandemic

Seal oftherealm

T

hetradewarbetweenAmerica and

Chinaparadoxicallybroughtsomeof

thecountries’citizensclosertogether.Ben

Kostrzewa,a tradelawyerforHoganLov­

ells,movedfromWashington,dc, toHong

Kongtohelphiscorporateclientsnavigate

duties,sanctionsandexportcontrols.He

usedtotraveltwoorthreetimesa monthto

themainland.Ifhetimedit right,hecould

passthroughtheborderchecksin 20 min­

utes.“Igottoknowthoseborderagentsve­

rywell”,hesays.

Thepandemichaschangedallthat.In

thefirsthalfof2019,China’sbusyagents

recordedover344mbordercrossingsbe­

tweenthemainland andtherestofthe

world(includingHongKong).Inthefirst

halfofthisyear,thatnumberwasdownby

over80%,accordingtoofficialstatistics.

MrKostrzewahasnotvisitedinalmost 22

months.“It’sfunnytobetalkingaboutthis

inthepasttense,”hesays.

Talks,ina futureconditionaltense,be­

tweenHongKongandthemainlandhave

sofarfailedtoeasetravelbetweenthecity

andtherestofChina.Butofficialsnowsay

a pilot scheme might soon allow small

numbersofvaccinatedpeopletotravelto

themainland withoutquarantine.Ifthe

schemeworks,someofMrKostrzewa’sfa­

vourite checkpoints in Shenzhen could

reopenbyJune,accordingtotheSouthChi-

naMorningPost, althoughtravelwouldbe

subjecttoquotas.

Fortherestoftheworld,visitingChina

willremainanordeal.Itislikearranginga

“statevisit”,saysonebankerwhousedto

makethetrip 30 timesa year.Thedocu­

mentaryrequirementscanbeonerousand

inconsistent. One delegation of senior

businesspeople,hopingtovisitShanghai,

wereaskedfortheirprimary­schooltran­

scripts.Afterthebureaucraticbother,the

boredom of quarantine awaits: a mini­

mumof 14 days,typicallyina hotelnotof

one’schoosing.Onewell­connectedmar­

riedcouplewereatleastgiventheoption

ofseparaterooms.Theytookthemwithout

anyhesitation.

ThebenefitsofChina’szero­covidstrat­

egycanbemeasuredinlivessavedandin­

fectionsaverted.Theeconomiccostofthe

country’sself­isolationishardertoquanti­

fy.Thetravelrestrictionsaremakinglife

harderfortheinternational“facilitators”

thatmakecross­borderbusinesstick,ar­

gues one investor in Shanghai. Remote

communicationcan maintainexistingre­

lationships, but some things are better

doneface­to­face.Theinvestorusedtoget

toknowhismanagersoverdinners,drinks

andcigars.“Ifyou spend three hoursa

nighttogether,bytheendofthatweek,you

knowtheguy.”Noonehasthestaminato

replicatethatonZoom.

Someknow­howisalsotacit,embodied

inpeopleorteams.Totransmitthisknow­

howit isnecessarytomovethemindsthat

carryit.Increasingspendingonbusiness

travelby10%raisesproductivityby0.2­

0.5%inthevisitedsector,accordingtoa

studyofAmericantravellersbyMariacris­

tinaPivaoftheUniversitàCattolicadelSa­

croCuoreandherco­authors.Anotherstu­

dybyMicheleCosciaoftheituniversityof

Copenhagen,aswellasFrankNeffkeand

Ricardo Hausmann ofHarvard’s Growth

Lab,madeuseofaggregated,anonymised

Mastercarddatatomapthismovementof

minds.TheyestimatethatChina’secon­

omywouldbe13%smallerif it hadnotben­

efitedfromtheknow­howdiffusedbyin­

ternational business travel. The biggest

contributionsweremadebyvisitorsfrom

GermanyandSouthKorea(seechart).

ForeigndirectinvestmentinChinahas

sofarremainedstrong,thankstotheecon­

omy’searlyrecoveryfromthepandemic.

Andfewmultinationalsareleaving.Some

foreignfirmsmayevenlocaliseactivities

doneoutsideChinatokeepdoingbusiness

there.Companiesare“batteningdownthe

hatches”,accordingtotheEuropeanUnion

ChamberofCommerceinShanghai,bring­

ingmoreoftheirsupplychainonshore,be­

causeofgeopolitical tensions,covid re­

strictionsandnewlaws thatlimitdata­

sharingacrossborders.“Companiesmight

beforced tohave two differentsystems

running:oneforChina,andoneforthe

restoftheworld,”saysBettinaSchön,the

chamber’s vice­president. “This will be

horriblyexpensive.”Itisnotthattheworld

isleavingChina;morethatChinaisbe­

cominga worlduntoitself.n

H ONGKONG

Thenon-zerocostsofChina’s

zero-covidpolicy

Diffusion class

China, impact on GDP if business travel

were to cease*, by place of origin, %

Source:

Harvard’s Growth Lab

*Based on 2011-1 aggregated and

anonymised Mastercard data

Rest of world

Hong Kong

Italy

Singapore

France

Denmark

Britain

United States

Taiwan

Japan

South Korea

Germany

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