24 February 2016, Cambridge’s office and laboratory market turned in another stellar performance in 2015, with take-up easily exceeding 1 million sq ft. This is an exceptional performance for a market of its size - Manchester, a significantly larger market, recorded take-up of 1.3 million sq ft - but the challenge for those with land and property interests in Cambridge is how to maintain this momentum for the long term.
The figures were revealed by UK property consultancy Carter Jonas in the first of its 2016 series of Commercial Edge research reports, which detail commerical property market activity and sentiment in a number of key locations across the country.
Total take-up in Cambridge for 2015 amounted to 1,120,277 sq ft, with a Q1 figure of 344,000 sq ft getting the year off to a strong start – a 45 per cent increase on Q1 2014.
Of the city’s four main commercial property zones, Zone 4 – which covers the outer area of the city where developments such as Chesterford Research Park, Granta Park and Cambridge Research Park are located – recorded the highest level of take-up, reaching 780,514 sq ft.
The announcement of three sizeable new-builds in this zone accounted for much of this take-up. These were the Granta Park ‘superdeals’ of 155,000 sq ft and 93,000 sq ft for Illumina Inc and Gilead Science Inc respectively, together with ARM Holdings plc’s leasing of 195,000 sq ft for new buildings and expansion of its HQ at Peterhouse Technology Park.
However, the average transaction size across the city last year was just 7,469 sq ft.
At the beginning of this year (2016), the overall availability of office and laboratory stock stood at 895,560 sq ft, higher than in 2015, although a significant proportion of it is poor quality accommodation.
There is a distinct shortage of larger floorplates across the city, notably those over 20,000 sq ft, which can house a single tenant. Only nine such buildings were available at the end of 2015, eight of which were located in Zone 4’s business parks.
A combination of sustained occupier demand and limited supply is putting rents under pressure and further steady growth is anticipated for 2016. Quoting rents for Zone 1 – the prime central area around CB1/Station Road and Hills Road – are currently £36.50 psf and are expected to increase to £37.00 psf by the end of 2016.
At £30.00 psf, rents on the Cambridge Science Park, St John’s Innovation Park and Cambridge Business Park, in Zone 3, are the highest achieved outside the prime central area and are expected to climb to £31.50 psf by the end of this year.
The office development pipeline with outline planning consent totalled almost 3.8 million sq ft at the end of 2015, a rise of 35 per cent on the 2014 equivalent figure. Only a handful of these schemes have a definitive completion date and this year will see a lack of major new-build premises being delivered to the market.
Summarising the 2016 Cambridge Commercial Edge report, Darren Yates, head of research, Carter Jonas said: “Take-up exceeding 1 million sq ft sees Cambridge standing alongside the larger metropolitan markets such as Manchester, which, typically, is the only UK city outside London to record such high annual take-up levels. One of Cambridge’s major attractions is its highly skilled workforce, which is a major draw for domestic and international occupiers alike.”
In looking to the future character of the Cambridge market, Will Mooney, Carter Jonas partner and head of its commercial division in the eastern region, commented: “Cambridge has passed a significant milestone in terms of the maturity of its commercial property market.
“With a diminishing supply of built office space, landlords will benefit from increased rents at reviews and lease renewals. However, steep rises in rents may well change the profile of the central zones, with incumbent occupiers having to re-locate.
“There is a case to be made for maximising densities in existing locations and revising the allocation of land uses if this city-region is to continue to benefit from the economic growth and business prosperity that such a sophisticated property market brings.”