Why Skanska is eyeing life sciences for future development and construction opportunities

A digital render of the new campus centre (Image: Simmons University)

Swedish construction contractor and developer Skanska is looking at developing and building more life sciences projects, amid a difficult residential and commercial development market.

Executives from the business explained that they would be looking “more and more” at opportunities for life sciences developments.

The company already has a track record of building academic buildings, either as a contractor or partnering with academic institutions to build learning centres alongside accommodation and other facilities.

In June this year, Skanska closed on a land investment with Simmons University in Boston, USA and secured the development rights on 158,000 sq m of development, called Longwood Place, in the Longwood Medical Area.

Skanska will pay for the land acquisition successively up until 2026 by building and financing a Living and Learning Centre for the university and a student dormitory with over 1,000 beds, as part of a contract worth $311 million.

Longwood Place will be a multi-phase development which in addition to the life science and research space, will include multifamily residential space, offices and community space. Construction will start in late 2026 once Simmons University has relocated to the new Living and Learning Center.

“Traditionally we developed mainly offices. In the last few years we have started to develop a bit more multi-family residential as well. And we have always had a little bit of the life sciences over the last few years but we are looking more and more at that sector,” Skanska’s chief financial officer Magnus Persson told investors.

“We have secured some very interesting pieces of land in the right places, especially in Boston, and we see there is a strong demand in the market. The outlook in that space seems very attractive for us to position ourselves in for a long run. Our intention is to explore this market more in the future.”

Persson added that the company already had the skillsets that allowed it to work on projects of this kind.

“Of course, there can be certain speciality contractors in terms of design and installation of such buildings that differs a little bit from a traditional office building but that is more in terms of what subcontractors we are buying in there,” he added.

Persson’s comments came against the backdrop of a difficult environment for residential and commercial development for Skanska.

The company saw its revenue fall by 15% in the second quarter, blaming lower sales volumes in residential and commercial property development.

Skanska’s revenue for the quarter was SEK 39.9 billion (US$3.8 billion), down from SEK 44.8 billion ($4.3 billion) in the same period a year before. Adjusted for currency effects, that meant a decline in revenue of 15%.

Strong construction orders in US and Norway

Meanwhile, Skanska’s construction arm enjoyed a stable performance in the second quarter of the year across nearly all markets.

New orders were particularly strong in the USA, where they jumped to SEK 23.9 billion (US$2.3 billion) in April-June 2023, up from SEK 13 billion ($1.3 billion) during the same period a year before.

The figure equates to 19 months’ worth of production in the order book, compared to 17 months in Europe and 17 months in the Nordics.

Nonetheless, Persson noted that construction was “a bit more sluggish” in the UK in the most recent quarter, as a result of issues with commercial projects in London.

Skanska Group chief executive Anders Danielsson said, “We have seen large orders for civils projects in the US and Norway.

“Overall, we have a high order intake of over SEK 60 billion ($5.8 billion) in the quarter.

“We have the discipline to be selective in the market. We are going for projects where we can see we have a competitive advantage. We are going for projects in the core geographies and where we have the team with the right competencies in place so that are comfortable we can execute the project in a profitable way.”