Demand from knowledge intensive industries a challenge for Cambridge
Take-up of office and lab space in Cambridge continues to be dominated by knowledge intensive industries with companies in the sector accounting for 69 per cent of deals in 2020, according to Bidwells.
In December the most prominent office letting was completed with US software company MathWorks leasing 93,000 sq ft of the TusPark UK development within One Cambridge Science Park.
MathWorks already occupies two buildings within the park, demonstrating a commitment to Cambridge’s ever-growing technology cluster.
Fora agreed to lease the latest addition to the CB1 innovation quarter at 20 Station Road. The new 64,500 sq ft building is due to complete in 2023, with Fora agreeing to lease the whole building to keep up with Cambridge’s demand.
Due to the rapid expansion of the city’s knowledge-intensive economy, Fora is among a small number of other businesses offering flexible space in the Cambridge market.
Over the next 12 months, several new schemes that total almost one million sq ft are set to complete. The less good news is that more than 84 per cent of this space is already committed, leaving just under 130,00 sq ft to come to market to help meet relentless demand.
Bidwells research director Sue Foxley said: “The science and tech sectors drove investment transactions to £300 million in 2020; we estimate that this will rise for 2021 for both offices’ and laboratories as industries continue to thrive, settling back to pre covid trend levels or higher.
“The main concern will be the lack of available first-grade space; however, we expect an increase of second-hand space to be released to the market, which started to happen in 2020.”
Bidwells’ spring 2021 report reveals the second half of 2020 saw office and laboratory take up a return to trend levels following a COVID-19 disrupted H1.
Cambridge has been on the axis of the UK pandemic response sustaining business activity across the city.
The laboratory sector is facing a particular challenge with over 400k sq ft of functional requirements, the highest level for five years. This demand wall is set against an availability rate of just 3.7 per cent, inevitably placing pressure on rents.
The research shows that office and laboratory sectors have shown severe shortages of Grade A stock with both sectors having only 9.70 per cent of availability at the end of 2020.
The prime office yield remained stable at 4.5 per cent while the average transactional yield for offices rose to 4.95 per cent – both driven by robust rental growth due to the strong occupational demand from various sectors. Laboratories also saw a significant rise in investor interest during 2020 but standing assets remain limited.