Economic growth in Cambridge outstrips UK average
It’s that time of year again and whilst the start of 2020 hasn’t all been smooth sailing one thing to guarantee is the Carter Jonas Cambridge team launching our annual Cambridge Commercial Edge report, part of a series of research looking at the commercial property market in our key areas across the UK.
In comparison to several other markets, economic growth in Cambridge has been strong, increasing by 2.2 per cent per annum across the last five years. This compares to a 1.7 per cent per annum increase across the UK. Access to a highly skilled labour force continues to be a key attraction for the city and has contributed to phenomenal economic growth over the last 20 years.
This, coupled with output forecast to increase by 24 per cent over the next 10 years, reinforces why this resilient city is attractive for residents and businesses.
Take-up of office and laboratory space improved in 2019 with a total of 690,000 sq ft transacted. This was up nearly a third on 2018 numbers though is 13 per cent below the five-year annual average of 790,000 sq ft. Deal volumes in the second half of the year were slightly subdued, impacted no doubt by the wider political uncertainty leading up to the December general election.
Whilst many 2019 transactions were below 10,000 sq ft, some notable deals, particularly in the CB1 market, helped bolster leasing activity. Apple led the pack with a 79,000 sq ft pre-let at 30 Station Road in October. The firm is looking to occupy the space upon completion in 2021 and in September agreed 23,000 sq ft in nearby 10 Station Road to accommodate its immediate requirements.
Other notable deals were agreed outside the city centre, including 61,000 sq ft by DisplayLink and 26,000 sq ft by Citrix Systems, both at Cambridge Science Park and 51,000 sq ft by AstraZeneca at Eastbrook House.
Heightened transaction volumes meant availability decreased across the office market from 786,000 sq ft to 643,000 sq ft and stock in the CB1 area remains limited.
Most space is located in the city centre-periphery and northern fringe location. Here, approximately 440,000 sq ft is available, 101,000 sq ft of which is in Cambridge Science Park.
The park is undergoing a period of transformation since the collaboration with TusPark, helping to support its ability to attract tenants looking for good quality workplaces. Moving forward, the most notable projects in the pipeline include the 93,700 sq ft office development, One Cambridge Square at CB4, the refurbishment of 270 Cambridge Science Park along with 25,000 sq ft at Babraham Research Campus.
Exceptional rental growth was achieved in 2019, with levels reaching £46.50 psf in the CB1 and Station Road area. Rents are unlikely to increase over this level in the coming 12 months due to the lack of available built stock.
In the industrial market, availability remains high, more than 1 million sq ft, and take-up in 2019 was noticeably down on 2018 levels. The retail and leisure market has been driven by new national food and beverage operators, with brands such as BrewDog and Giggling Squid moving into the city centre area replacing failed operators Jamie’s Italian and Cau. Retail rents have remained flat at £210 psf (Zone A).
No whistle-stop tour would be complete without mention of investment numbers. Here, activity remained healthy with £323 million trading in 2019, up slightly on the £315 million recorded in the previous year.
Numbers were bolstered by the sale of 30 and 50/60 Station Road for £125 million. Prime office and industrial yields were unchanged at 4.5% and 5.5% in 2019, while prime retail yields softened by 100 basis points to 6 per cent.
Our research reports and their key findings will inform discussions with colleagues, associates and clients planning their next move. And looking ahead, it’s safe to say the general tone in Cambridge remains positive.
We have talked of a Boris bounce across the UK, but in Cambridge, we have been less impacted than others by the wider political uncertainty.
Whilst we await the outcome of the next stage of Brexit negotiations and the Government’s ability to secure a balanced and competitive trade deal it’s helpful to keep this in mind.