Nothing to write home about yet
How is the Cambridge market faring mid-year? Well, it is certainly living up to its name as one of the fastest growing economic regions and commercial hubs in the UK. But, on review of commercial real estate activity in 2017 so far has Brexit put the kibosh on the speed in which this industry will develop?
As we predicted at the beginning the year, the office market has remained resilient during the first half with take up totalling 398,832 sq ft, double the same period in 2016.
The city centre is also still proving popular; however there has been a further five per cent reduction in supply in the last six months, which is pushing occupiers to alternative locations on the periphery of the city, such as Cambridge Research Park and Cambourne Business Park, where there is some availability.
In the city centre, new records have been set outside of the successful CB1 area, which we ourselves are now enjoying! 11,067 sq ft of recently refurbished office space at Quayside was leased at £36.36 psf which, for a non-established office location, was a bit of an achievement!
That being said, the area has excellent amenities including an abundance of restaurants, bars and shops along the river. It goes to show how important these facilities have become to employers who will pay, not only for good quality office space, but for local amenities that will retain and attract talent.
Looking ahead to the remainder of the year, we predict that prime office rents will increase to £38 psf on average, which is the current quoting rent on a pre-let basis by Brookgate for 50-60 Station Road.
Unfortunately, the industrial market is not seeing as much success. Despite an increase in speculative development, the availability of good quality affordable space in Cambridge remains limited.
Lease terms on existing and secondary stock have remained stable with landlords still considering five-year terms. Headline rents are now peaking at £11 psf for quality and location, assets like these are let relatively quickly, disappearing from the market almost as soon as they are listed.
Supply constraints are also pushing occupiers to agree to poorer quality second hand stock further afield.
Similarly, retail rents have remained stable at ZA £280 psf, as at June 2017, for units in the Grand Arcade shopping mall. This is rapidly approaching its pre-recession peak of ZA £290 psf, a rate that can already be found on the High Street.
Reflecting on the predictions we made earlier this year, there was hope that we would have a clearer idea of the impact Brexit would have on the commercial market in Cambridge.
So far it has just been business as usual. Many clients were initially nervous and, of course, there was a quieter period over the summer while most of the industry disappeared to the Med to try and find some sun! But no drastic changes to cause any concern so far, even though the market has slowed.
Ultimately, across all commercial real estate asset classes in Cambridge, demand is dramatically outweighing supply. This is causing an increase in rents in the most desirable areas and pushing out many occupiers to the edge of the city where there are more affordable and available sites.
Research, science and technology sectors are still the growth areas to watch because of further development of the London-Stansted-Cambridge corridor and Enterprise Zone.
We haven’t seen any dramatic surprises over the last six-months and expect the market to continue the same trajectory until the constraints and opportunities brought on by Brexit become clear. Until then, we’ll keep advising our clients with the most up to date information we have and in the best way we know how.