Occupiers active in Cambridge but investors hold back

Negative investor sentiment that had emerged across the office, science and tech sectors in Cambridge at the close of 2023 continued through the first quarter of 2024, according to research by DTRE. The consultancy’s most recent market data showed that no investment transactions for offices and labs were completed across the city in the first three months of this year. It cited a shift in working practices, hesitancy due to macroeconomic conditions and planning challenges among the key factors affecting the mood of the market. Florence Weston, data analyst at DTRE, said: “In the office market, we are seeing a dislocation of investor sentiment with the market facts. We are recording strong fundamentals, with demand remaining strong, take-up reaching 73% above the Q1 five-year average, and low supply figures helping to push the rental tone. “In light of this, we are anticipating yield compression once investor sentiment recognises these positive messages. We do remain hopeful for a more active rest of the year but believe this switch will truly come into play at the start of next year. “Despite the lack of historical transactions for up-and-built lab buildings, we are confident in a more positive second half of 2024 for the science and tech capital markets, as we expect the trading of the first stabilised lab buildings in Cambridge to occur.” Take-up takes off In contrast, DTRE has tracked strong activity on the occupational front in the three months to 31 March in Cambridge. Take-up of lab and office space in the city hit 202,700 sq ft in Q1 2024, the highest opening quarter to date and up by 43% on the 141,700 sq ft recorded in Q1 2023. The office market made up 75% of take-up, totalling 151,300 sq ft, thanks to the deals falling into Q1. The sector grew by 16% year-on-year in Q1 2024. DTRE continues to track demand for offices in the city, albeit at a more subdued rate when compared with the science and tech sectors. Named demand stood at 339,000 sq ft, with 91% of occupiers seeking floorplates of less than 30,000 sq ft and 61% of tenants hunting for less than 10,000 sq ft. The majority of the demand for small suites is focused on city centre locations including Hills Road and Station Road. Labs, labs, labs Demand for labs remained on track moving into Q2, with the consultancy quoting 708,000 sq ft of named lab demand in the market, of which 483,500 sq ft is for active requirements. Smaller lab requirements are dominating the Cambridge market, with 72% of the total named demand seeking space of less than 30,000 sq ft and 31% of tenants looking for suites measuring below 10,000 sq ft. Turning to availability across the city, just 97,000 sq ft of up-and-built lab space was available as of 31 March, with the majority of it located within the southern cluster, namely Babraham Research Campus (pictured), Granta Park, Unity Campus and Chesterford Research Park. DTRE tracks around 190,000 sq ft to come off the ground by the end of this year, with the completion of 1 Granta Park by BioMed Realty and the refurbishment of the former AstraZeneca building, known as 310, at Cambridge Science Park by Oxford Properties. Mission Street will also deliver the second phase of the Press at Foxton alongside Abstract completing its South Cambridge Science Centre. Two office-to-lab conversions are also expected to come on stream, including 316 Cambridge Science Park and a building at CamLIFE. Photo © BioMed Realty and Babraham Research Campus