Lab and office rents tick up across OxCam Arc

Prime rents for fitted space across Oxford and Cambridge have continued to grow over the course of 2023, according to Bidwells and Cheffins. Rental growth in both markets was recorded despite global uncertainties and tougher fundraising conditions for early-stage companies, which dominate the take-up of lab and office space. Cambridge According to the Datapoint report released by Cambridge-based property consultant Cheffins, prices in the region have now hit £68 per sq ft which is an increase of 40% of that achieved at the end of the previous year. Michael Jones, director and head of commercial at Cheffins, said: “It is important to note that, whilst deals were then being negotiated at higher levels, this figure was held back by the lack of empirical evidence to support higher figures at that time. “As such, whilst rents are expected to continue upwards during 2024, it’s highly unlikely this will be at anything like this level of increase.” For offices, rents have remained stable over 2023, with prime asking prices in the city averaging £57 per sq ft and at £40 per sq ft on the edge of the town. Overall, Cambridge market has seen office take-up go down by 3.8% year-on-year to 394,000 sq ft. Over the past 12 months, some offices have been converted into labs. Bespoke examples include Endeavour House on Vision Park in Histon, a scheme reportedly driven by the lack of supply and high level of demand in this sector. More recently, planning and financing has also been granted for the Vitrum Building on St John’s Innovation Park to be converted from 44,000 sq ft of office to 133,000 sq ft of bespoke research and development space.  Cheffins noted that there are signs of a slowdown of repurposing offices into labs in Cambridge with more purpose-built lab space coming to the market. Going into 2024, Cheffins tracks the strongest demand in Cambridge at the larger end of the scale, with a floorplate measuring from 30,000 sq ft, with fewer requirements in the 3,000-10,000 sq ft range that have traditionally formed a significant proportion of the overall demand. Oxford In contrast, in Oxford demand for space within larger size bands has reduced, according to the latest data from property consultancy Bidwells. The move comes amid reduction in venture capital funding in 2023 at the higher end of the market and a number of larger space requirements having been satisfied. Prime rents for lab space in Oxford increased to £76.50 per sq ft from £75 per sq ft recorded at the end of 2022. Yields for lab space moved out to 4.75%, reversing the tightening seen immediately after the pandemic, although Bidwells estimates that these rates could prove to be the peak in the current yield cycle if the Bank of England starts to reduce interest rates this year. Rents for prime office space in Oxford reached a new high of £60 per sq ft, up from £55 per sq ft the year before. Prime office yields rose by 50bps to 5.5% and are now at their highest level since 2016. Robert Beatson, partner and head of office and labs for Oxford at Bidwells, said: “As long as Oxford continues to be a world-leading centre of excellence for science and as the pace of medical innovation and drug discovery continues, commercial space in the city will attract significant, long-term occupier demand from participants in these industries.” Photo © Louis Reed/Unsplash