Is industrial the secret to Cambridge’s continued growth?
Cambridge is not known for its abundance of industrial stock – at least not in the traditional sense, writes Will Rooke of Carter Jonas in Cambridge.
There is an estimated 500,000 sq ft of space available throughout Cambridge and immediate surrounds but many of these are trade counter units. Is this all about to change?
Since 2007, there has been a lack of development of new industrial units, which means the vast majority of the Cambridge industrial stock is poor quality and second hand accommodation.
Cambridge has become renowned for its focus on Research & Development and has attracted some of the world’s most significant businesses that now base their headquarters in the city.
This is partly because of the talent and potential employee base found at the university but also because of the campus-styled accommodation the area offers, as well as ample parking close to vital transport routes and suitable residential homes for employees.
Ultimately, the quality of the stock has not historically been called into question and there has been no real need for new industrial warehousing, let alone the hi-tech, automated distribution sheds that everyone is currently raving about.
Many businesses use the secondary warehouse-style accommodation for their offices, primarily because the rent is cheaper than if they occupied and paid the rents for traditional office space.
However, industrial owner occupiers have recently seen the benefit of selling their own premises in the middle of the city and then renting secondary stock slightly further out.
This is compounded by the pressure to redevelop the city centre industrial into alternative higher value uses, with residential, retail warehousing and student accommodation making the landlords the most bang for their buck. These sites include CB4 which surrounds the relatively new Chesterton Sidings railway station, as well as the Paddocks and Clifton Road industrial estates.
In the last six to 12 months, there has also been a noticeable change in the long-term trend. There has been a dramatic increase in both speculative development and pre-leasing activity in the area that immediately surrounds Cambridge.
This is predominantly down to a change in occupier demand for better quality accommodation, which they recognise helps to attract and retain the best talent.
Infrastructure improvements in the region are also making businesses more efficient. The lack of suitable stock has been noticed by some developers who have chosen to speculatively build industrial accommodation before even agreeing pre-lets.
Salmon Harvester is one such developer which has submitted planning for 68,000 sq ft in Cambridge South. The units will be completed in 2018 and let on traditional leases or sold to owner occupiers. All in all, it seems that industrial is back on the investment agenda.
Prime rents in Cambridge are set to rise but are currently at around £13 per sq ft for trade units and £11 per sq ft for pure industrial buildings in the city centre.
Good secondary rents stand at around £7.50 to £9 per sq ft, depending on location and proximity to the city. In comparison, poor secondary rents are around £4.50 to £5 per sq ft, largely in out-of-town industrial parks. Cambridge has been dubbed one of the UK’s economic growth cities and in our view, it is on the right track.