How is Cambridge faring?
Cambridge has seen significant economic growth in recent years, but what has made the city so successful?
As we have seen in our recent mid-year Commercial Edge research report, economic growth for 2017 was just under 3.5 per cent which was twice the national average. Total output growth for 2018 is forecast at 1.9 per cent. However, several sectors in the city significantly outperformed this growth rate, including computing and information services, media, and professional services.
Cambridge University’s Centre for Business Research has reported global turnover growth for Cambridge companies in 2017 as 14.4 per cent compared to the previous year’s figure of 10.8 per cent.
Consumer expenditure has been rising at a much faster rate than the national average (an estimated 3.6 per cent pa in Cambridge compared to 2.2 per cent pa nationally). The city should continue to outperform the UK, although the differential is likely to reduce.
The city’s retail sector has continued to trade well on the back of a relatively affluent catchment and strong tourist sector. However, it is not entirely insulated from the broader changes sweeping through the UK’s high streets, with an increase in vacant units in the city centre.
Traffic congestion also remains a severe problem and increased investment in innovative public transport solutions will be required to deliver capacity for future growth.
In the longer term, the city’s connectivity will be further enhanced through its position at the eastern end of the Oxford-Milton Keynes-Cambridge growth corridor.
This will not only improve east-west transport links but also may help alleviate the city’s growing housing pressures, and also help to foster a knowledge cluster across a number of key economic centres.
The city’s strong economic fundamentals mean investor demand has remained strong this year. The UK funds are particularly active, along with the city’s colleges as well as overseas interest.
Over £170 million has been transacted in the first half of the year, compared to a total of just under £100m over the whole of 2017. The largest deal of the year so far has been the sale of Cambridge Research Park for £78m by Rockspring to Royal London Asset Management reflecting a net initial yield of 4.9 per cent. The park comprises eight office properties and nine mid-tech units along with 13.5 acres of development land.
In terms of retail, 59 St Andrews Street was purchased by Emmanuel College from M&G Real Estate for over £32m reflecting a NIY of 4.8 per cent.
Investment market performance has been strong, with returns in the office sector approaching 30 per cent pa and industrial returns at more than 12 per cent pa (MSCI Quarterly Index, June 2018). Prime yields have been stable over the first half of the year, at 4.5 per cent for offices, 5.5 per cent for industrial and 3.8 per cent for retail.
As we can see, the Cambridge market is continuing to perform extremely well and, as evidence shows, this is mainly due to its strength in sectors such as technology, engineering and pharmaceuticals, underpinned by its unique Research & Development sector and the University of Cambridge. Long may it last!