Cambridge office market 22nd November 2013

The thriving Cambridge office and laboratories market will grow to 10m sq ft of built stock over the next two years meaning stock would have doubled in 15 years, while prime rents have lifted 25% in the past 12 months, reports Bidwells in research exclusively revealed by CoStar News.

Christopher Reeve, Head of Office Agency at Bidwells in Cambridge, said: "This year alone almost 2m sq ft of development commitments have been made or are in hand. Examples include TWI's owner occupier development at Granta Park, Astra Zeneca's move to the Cambridge Biomedical Campus and initial short term lettings, prelets on the Cambridge Science Park, and the development of the next phase of CB1 in the city centre to Mott MacDonald."

When the 10m sq ft stock level occurs Cambridge will have doubled its office/labs stock over the past 15 years. Bidwells reports that the stock level of 10m sq ft would compare with Reading and Cardiff. It adds that a tipping point has been reached whereby average 10-year ffice/lab take-up has risen from 500,000 sq ft pa to 750,000 sq ft pa. A take up of 750,000 pa compares with markets two of three time larger in terms of office stock for instance Leeds and Edinburgh, Bidwells reports.

In terms of the activity ratio (office stock/average take up) Cambridge has become one of the most vibrant office locations in the UK. Its rates of rental growth, where prime office rents are now pushing the mid-30s, reflect an increase of over 25% in the past 12 months according to Bidwells' research.

Bidwells writes that its volume of prelet agreements ranks it as one of the busiest office markets in the UK alongside Aberdeen and central London. "Current demand for office/labs is almost double its previous highpoint in 2000," states Chris Reeve. "Taking into account consented or potentially suitable lab and office sites my estimation is there is less than three years' supply of development pipeline land available. There is capacity still at the Cambridge Biomedical Campus, Cambourne and Brookgate's CB1 and CB4 scheme but beyond these precious few locations can cater for larger occupiers."

Bidwells' research points to the availability of built stock dramatically diminishing at the start of the year, with barely 200,000 sq ft of high quality 'oven ready' office space now available in Cambridge and its surrounding business and science parks. "Since we leased 30,000 sq ft to Siemens at PACE's refurbished Francis House last month (Siemens paid £31.50 per sq ft on a 10-year lease) there is no refurbished or newly built office over 15,000 sq ft currently available in the heart of the city centre," observes Reeve. "What little accommodation is left could be taken up by just by a few occupiers, fuelling further the necessity for larger Cambridge occupiers to procure accommodation by prelet. "If this trend continues though we will run short of employment designated development land too.

Cambridge is the fire which warms much of the rest of the UK economy, and it is important companies here have space to grow. "The companies based in Cambridge are predominantly R+D and innovation focussed business. Whilst the Thames Valley for example shares similar hi-tech company names, often these are sales functions of US companies merely selling existing technology into EMEA rather than pure research functions inventing the new products. "In Cambridge whilst many recognisable company names are here, such as Microsoft and Oracle, their functions are much more orientated to innovation and research and development than elsewhere in the UK.

Most worldwide companies are here primarily because they have acquired innovative start-ups, which they have then had to keep based in Cambridge due to the research and development staff based here. Amazon's acquisition of EVI this year is a case in point. This is why Cambridge is different, it does not compete in a market for footloose occupiers and has a totally different driver for space relative to the Thames Valley for example."