Rents for life sciences-related space across the Golden Triangle markets are set to continue to tick up over the next year, despite a projected increase in supply levels.
According to Savills, rents for labs are set to grow on average by 10% across the UK’s key life sciences markets of Oxford, Cambridge and London in 2024.
Oxford
The Oxford market has continued to experience strong rental growth, the most recent figures from Savills have shown, with fully fitted lab suites achieving rents of over £75 per sq ft both in the city centre and out-of-town locations.
In 2024, Savills expects fitted city-centre labs to hit rents of £85 per sq ft, while landlords at out-of-town fitted labs will ask for £82.5 per sq ft.
For shell and core labs, located in the city centre, rents are projected to hit £65 per sq ft in 2024, from £60 per sq ft. Rents at out-of-town locations are set to grow to £60 per sq ft from £55 per sq ft.
Savills also found that there is currently 220,000 sq ft of life sciences-related space under offer in Oxford.
If this space transacts before the end of the year, it will represent the highest year of take-up ever recorded, totalling 543,000 sq ft.
There is currently 1.2m sq ft of office and lab space available in Oxford, of which 445,000 sq ft is under construction.
The total figure represents an 8% increase in supply from the end of 2022. However, Savills noted that no suites over 5,000 sq ft are available in the market for immediate occupation.
On the investment front, Savills recorded £308m of assets either under offer or in the pipeline to be transacted in Oxford, which would result in turnover for the year being below the last two years averaging £554m.
Savills director of offices and life sciences commercial research Steven Lang said: “This fall has been caused by a lack of stock being brought to the market, with investor interest in the market remaining strong.”
Savills recorded 12.3m sq ft of life sciences-related space in the development pipeline in Oxford.
However, 86% of the pipeline is scheduled to complete after 2024. Furthermore, 77% of the space does not currently have a planning permission.
Lang added: “The dearth of supply is resulting in landlords exploring fitted solutions to capture the growing tenant demand for laboratory space.”
Cambridge
According to Savills, the supply of lab space in Cambridge remains constrained, with the vacancy rate below 2%, despite availability of labs in the region growing to 47,230 sq ft from 18,748 sq ft at the end of last year.
There is an estimated 10.6m sq ft of office and lab space recorded in the development pipeline. However, 76% of the pipeline is still being subject to planning.
New rental tones have been set on fitted labs, hitting £71.5 per sq ft. Savills expects the prices to reach £74 per sq ft for fully fitted out-of-town labs in 2024. For out-of-city Cat A labs, the rents are seen to increase to £64 per sq ft in 2024 from £61.5 per sq ft.
Labs in an urban environment are yet to be developed in Cambridge, with conversion of 2-14 Fitzroy Street having just secured a planning approval.
Savills is projecting rents to stand at £91 per sq ft for fully fitted labs in 2024 and £81 for Cat A labs.
Turning to investment, the consultancy predicts volumes to reach £900m for 2023, which is in line with performance for the last two years, thanks to strong investor demand in the market.
London
Savills’ data tracks 6.2m sq ft of life sciences-related space in the development pipeline until 2030 in London, of which 50% is still subject to planning and just 551,000 sq ft currently under construction.
Lang said: “The provision of purpose-built laboratory schemes has historically been limited in London. “Occupiers who required laboratory space had been predominantly leasing office space and undertaking Cat B works themselves.”
Evidence of rental tones for fitted lab space in the UK’s capital has started to emerge last year, with prices standing at between £85 and £110 per sq ft after the first wave of lettings.
Quoting rents for future fitted lab schemes range from £85 to £130 per sq ft, according to Savills.
When investment is concerned, Savills noted that there is yet to be a sale of a stabilised life scheme in the London market, with the sales that have occurred so far all having reversionary potential.
Lang added: “The majority of transactions that have occurred are refurbishment/repositioning of offices to life sciences or redevelopment.
“The investor appetite for development or repositioning opportunities has been strong, with £1.1bn of capital deployed into life sciences-related assets in the last two years.”
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