Cambridge property scene has a spring in its step
The launch of our annual Commercial Edge research report is a key milestone in our year, writes William Rooke, Partner, Carter Jonas, Cambridge.
With dry January over and the first signs of spring appearing, many of us start to look up from our desks and take an opportunity to network – invitations to various business and property industry events are flooding in.
At Carter Jonas, as well as providing clients and associates with a comprehensive update on our markets, we invite key occupiers and industry players to garner their thoughts on new developments, trends and opportunities.
In Cambridge we heard from Mark Cotterell, property director of Arm, to discuss the business’s upward trajectory and the importance of locality and a considered property strategy in its development. As we all know, Arm is truly one of our city’s (and the UK’s) greatest success stories. Founded in Cambridge in 1990, it is the world’s leading semiconductor IP company; its technology reaches around 70 per cent of the world’s population.
Genius and hard work aside, the role location plays in the success of a business should not be underestimated. Cambridge has one of the most dynamic economies of anywhere in the UK, underpinned by its leading universities and highly skilled labour force. Such factors directly affect the property industry and decisions taken in relation to development and future investment.
In addition to the standard updates, office and industrial take-up, rental tones and availability (more of which later), one of the key takeaways from the report is the advice to commercial landlords to invest in their properties. Increasingly we find occupiers placing a greater emphasis on the quality of space.
Because of this, the rental gap between good and poor quality second-hand space is widening and there is an increasing amount of secondary space, particularly in the 5-15,000 sq ft bracket, available. Retrofitting and upgrading this stock would render it more attractive to occupiers, which in turn would help to minimise costly void periods and increase income.
Turning to the numbers more closely, total available office space across the Cambridge market has fallen from 1.1 million sq ft at the end of 2017, to 786,000 sq ft at the end of 2018.
Whilst current availability represents just over one-year’s supply, we need not be too alarmed as much of the demand will be satisfied by existing stock coming back to the market.
Interest in the central business district remains positive. Brookgate’s 156,000 sq ft scheme at 50/60 Station Road is now almost complete and is largely pre-let. As such, they and the fund Aviva will continue the redevelopment of the station area with the next phase at 30 Station Road, which will provide a further 79,000 sq ft of Grade A office accommodation over seven floors. Once under construction and available for pre-let, we believe this building will be the catalyst for further prime rental growth, and until this point, prime rents will plateau.
Take-up was 524,000 sq ft in 2018, below the long-term average of 700,000 sq ft pa, whilst the average transaction size was just under 5,000 sq ft across 110 deals.
Unlike 2014 and 2015, no ‘super-deals’ took place, (deals over 75,000 sq ft to a single occupier). 2018 take-up would have been considerably higher if two transactions anticipated for Q4, totalling over 100,000 sq ft, had not fallen into 2019.
The two biggest deals of 2018 were 50,000 sq ft at the Eastbrook Centre, let to the aforementioned Arm Holdings, and 43,000 sq ft, let at Building 1030, Cambourne Business Park to Carl Zeiss.
There were other significant lettings including Mediatek taking 28,500 sq ft at Cambourne Business Park and Owlstone Medical acquiring 16,000 sq ft on Cambridge Science Park.
The prime office space at 50/60 Station Road saw a number of lettings with Amazon, Costello Medical and Samsung amongst those taking space. As a result, the property is now 90 per cent pre-let or under offer, with completion due later this year.
Whilst last year saw a decrease in take-up, our data shows that it has been consistently strong over the last three years, thanks to Cambridge’s status as a key UK growth hub.
The challenge of accommodating this growth is considerable, with increasing pressure on the city’s already constrained housing and transport infrastructure, and limited sites for commercial development.
To meet demand, the city will need to provide both creative short-term solutions and significant long-term investment; all of this against a backdrop of economic and political uncertainty. Stay tuned.