Microeconomic headwinds have put the lab development pipeline across the Golden Triangle under pressure, according to the most recent research by Cushman & Wakefield.
The consultancy tracked 3.9m sq ft of science-related space that has been in receipt of planning permission across the key markets of Cambridge, Oxford and London and which has not yet started on site.
The researchers at Cushman said: “While this represents a considerable pipeline, headwinds such as build cost inflation and finance costs have put development appraisals under pressure, and we do not expect all of the consented space to be delivered.”
In addition, high interest rates are continuing to impact the potential development pipeline. Prime yields in the Golden Triangle remained flat over the quarter, at 5%, despite the more positive outlook.
Cushman’s report said that if inflation continues to move in line with targets, moderate interest rate cuts are expected to occur in the second half of 2024.
“This could lead to improvement in investor appetite,” the researchers said.
Over the course of 2023 and the first half of 2024, the Golden Triangle life sciences real estate investment market has seen subdued volumes with £94.3m transacted during the three months to 30 June, which is down on the long-term quarterly average. The largest disposals over the quarter saw Oxfam House in Oxford Business Park and the former Debenhams department store in Oxford town centre changing hands.
Turning to space under construction, Cushman has reported 3.6m sq ft, of which 13% has been pre-let, leaving a speculative under-construction pipeline of 3.1m sq ft across the Golden Triangle at the close of June.
Major construction starts over the second quarter of this year included One North Quay in Canary Wharf and The Daubeny Project at The Oxford Science Park.
However, the research team at Cushman said the response from developers over the last couple of years to the undersupply of lab space in the Golden Triangle is redressing the supply-demand imbalance, with additional supply likely to enable further growth in the sector.
According to data, Oxford and London have higher levels of availability, while in Cambridge, vacancy levels remain very low, at 1.3%, as of the end of June.
Photo © Chokniti Khongchum/Pexels
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