As a world leader in the life sciences and technology sectors, Cambridge has weathered the storm over the past 18 months more successfully than many other similar locations across the UK. With global pharmaceutical giant AstraZeneca headquartered in the city, Cambridge was thrust into the global race to formulate and manufacture a suitable vaccine to arrest the global Covid-19 pandemic.
Demand for office and laboratory space remained healthy last year, with take-up broadly in line with the five-year average. This year has continued in the same vein, with significant deals either completed – such as the 93,000 sq ft taken by MathWorks on Cambridge Science Park – or at an advanced stage. If the latter go ahead, supply of available space will definitely be squeezed.
So much so that Matt Soules, director and UK science lead at Savills, predicts that bespoke lab space could run out in Cambridge by the end of 2021.
“The big challenge is space availability,” he says. “We are seeing that there are a number of requirements and pent-up demand, both in the city and in the surrounding area. But by the end of this year, there is going to be no purpose-built laboratory space, and so companies have a decision to make. They have to either put their growth on hold or look elsewhere,” he says.
Hurdles ahead
The reality of Cambridge missing out on further inward investment is real. Soules adds: “Stevenage has got a very vibrant life science community centred around certain gene therapies. And people may choose to go there, for example. There is a danger that we could lose some of our talent to other cities in the short term. Smaller developments are needed which cater for these sorts of tenants, and for that to happen, investors and developers perhaps need to be a bit bolder in how they develop things more speculatively.”
Speculative development isn’t an easy ask, especially in the current economic climate. Soules says: “I know it’s difficult, because often there are no covenants with these tenants. The UK has very little data to back up rent levels. So for many it is a leap of faith. Being a bit more bold and developing will reap rewards for the city and for those that choose to do it.”
Development could be jump-started if Cambridge’s gigawatt economy can power up quickly to take advantage of the emerging battery storage industry. Typically housed on former agricultural land, battery storage projects are part of a dynamic and growing sector.
Gemma Goddard, a partner in commercial property at law firm Birketts, says: “In terms of the UK’s goal, overall, the aim is to achieve 35 gigawatts of battery energy storage by the year 2050, and in January this year we were only at about 1.8 gigawatts of installed capacity. So you can see there’s quite a long way to go, and there is lots of activity that is bound to happen in the market over the next 10 to 20 years.”
Goddard believes Cambridge and the surrounding areas, especially to the north-east and south, have an enviable position in terms of their location. “Cambridge has always been at the forefront of technology and science, and it is great to see the region embracing this new technology as well,” she says.
Tech vs resi
Landowners looking to move into this sector are weighing up whether technical innovation or traditional housing requirements will yield the best dividends. Demand for new living accommodation is acute, and current supply constraints are pushing prices ever higher. The figures speak for themselves. According to Savills, Cambridge’s median house price is £435,000, while London’s is £495,000.
Tom Fraser, head of Savills’ Cambridge office, says: “The one thing that Cambridge does have to deal with is an affordability issue. The average house price to income ratio in Cambridge is 12.4, London is 12.5. The national average is 7.8, so there is a need to address this.”
The good news, according to Fraser, is that more housing is around the corner. Some 22,000 houses either have planning consent or are currently being delivered. The northern cluster is home to two of the biggest development sites – the Anglian Water and Marshall Airport sites.
Rebalancing the UK’s most unequal city in terms of house prices will require a host of different measures, not least to overcome the challenges of retaining its historic charm while dealing with tight greenbelt and infrastructure issues.
Tom Newcombe, partner and head of the planning and environmental team at Birketts, says many people simply cannot afford to live in the city centre and have to commute from outlying areas. “We need strategic thinking, blue-sky thinking. We need to look at new ways of doing things,” he says. “It is well understood that Cambridge is going to be one of the engines of growth for the future. And we are at one end of the Oxford-Cambridge Arc.”
Future thinking
Strategic thinking is something that membership organisation Cambridge Ahead knows all about. The body is hosting a series of workshops this year to understand the post-pandemic economic landscape.
Chief executive Jane Paterson-Todd explains: “The world is changing, and we need to know to what extent that may change the way a city like Cambridge will operate.” She believes that different housing tenures such as BTR, private rental and social housing could go some way to ease the city’s affordability crisis.
This is just the sort of flexible approach that mayor Nik Johnson is keen to encourage. Having been elected as mayor of the Cambridgeshire & Peterborough Combined Authority in May, he is open to constructive dialogue with real estate developers and investors.
“I would ask all the developers to come to this area, but [say to them] when you’re coming here, if you come up with designs, with new ideas that work and deliver and improve, particularly health improvement, then I want to work with you. If you also are that sort of developer that prioritises taking on the environmental crisis and you want to put together developments that are net-zero carbon, then that is a priority to me. And that’s where money is, for me, well spent.”
Expert speakers
- Tom Fraser, head of office, Savills
- Gemma Goddard, partner, Birketts
- Nik Johnson, mayor of the Cambridgeshire & Peterborough Combined Authority
- Tom Newcombe, partner, Birketts
- Jane Paterson-Todd, chief executive, Cambridge Ahead
- Matt Soules, director, Savills
