Science and tech sectors trigger Cambridge property ‘gold rush’
Scale-up Science & Technology businesses have sparked a fresh gold rush for office and laboratory space in Cambridge – and the smart operators are negotiating pre-lets to ensure their growth plans are not torpedoed by lack of options.
New research from YouGov commissioned by Bidwells reveals that the demand for office and lab space in Cambridge is close to 1.3 million sq ft – the highest level since 2014 when AstraZeneca decided to move from the UK’s North West to the Cambridge Biomedical Campus. This takes account of current pre-let commitments.
The race for space is set to quicken as S & T businesses plan to dramatically ramp up their spend on Research & Development. The faster they grow their operations and scale headcount, the more urgent becomes their need to broker sufficient space to accommodate them into their expansion strategies.
Bidwells’ director of research, Sue Foxley, told Business Weekly: “Our latest analysis of the Cambridge office and laboratory market finds that 0.6 million sq ft of new space will complete during the first half of 2019.
“This is the largest increase in supply in over a decade which perhaps sounds alarm bells for some given the apparent slowdown in demand for labs and offices combined to 1.154m sq ft at the end of 2018.
“The reality of the market paints a different picture. The vast majority (85 per cent) of this space is pre-let or already under offer. This, in theory, leaves a total of 91,000 sq ft available during 2019.
“Given our understanding of current requirements, we expect more than 50 per cent of this space will be let shortly after practical completion.”
Given such unrelenting demand there is inevitably a price to pay. The pre-letting activity, combined with a slight increase in take-up in 2018 compared to 2017, underpinned a further increase in rents.
During the second half of 2018 the prime office rent rose to £41.50 psf, with increases also seen for all grades of second hand space. The prime rent for laboratory space rose by 1.4 per cent during 2018 to £34.50 psf.
Foxley added: “These latest lettings figures are consistent with the findings of research undertaken by Bidwells on the location and property requirements of major R & D companies. The research, undertaken by YouGov on our behalf, underlines the importance of location.
“The ability to recruit highly skilled staff, combined with the requirement to be near the centre of research ideas and innovation are the determinants of location for such businesses.
“With a global outlook these companies will consider location from an international perspective and therefore are compelled to be exacting in their requirements.
“These requirements need to be taken seriously: 52 per cent of the global R & D companies participating in our survey expect their R & D budget to grow over the next five years, while 30 per cent think it likely they will take new floorspace, predominately due to expectations of business growth.
“The availability of property to grow a business was considered extremely important, considerably more so than the cost or lease terms of that space.”
The top three location considerations for global R & D businesses were:-
- Ease of recruiting and retaining staff
- Ultra-fast and high-volume data connectivity
- Availability of property to grow R & D activity
Foxley added: “This clearly has implications for location decision-making on top of concerns over access to skills and innovation which preoccupy all knowledge based businesses.
“Given the recent tightness in the Cambridge office and laboratories market, particularly in the accessible in demand locations, it is therefore unsurprising that such companies are opting for pre-lets.
“With the business priority to keep pace with expectations for “continuous innovation” as noted by many of our respondents, taking the risk on the market to supply the goods, particularly for specialised laboratory space, is increasingly not an option.
“This long term perspective towards occupational requirements of incoming and expanding companies, combined with pressures from the ecosystem of new businesses in Cambridge’s science and tech sectors in particular, will place further pressure on rents.
“While the wider economic and political backdrop clearly remains uncertain, we expect these underlying market pressures to underpin prime rental value growth of between 2-3 per cent in 2019.”
• PHOTOGRAPH: Bidwells’ director of research, Sue Foxley