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5 Things You Need to Know About Big Box Logistics In Q3 2024

Q3 2024 Big Box take-up has reached 18.4 million sq ft. That’s ahead of 2023 (18.2 million sq ft) but slightly behind pre-Covid averages. The traditionally slower summer market saw 5 million sq ft transact, with the biggest letting being Cain International’s Link674 in Ellesmere Port (674,000 sq ft).


After twelve successive quarters of decline in the rolling annual take-up – Q2 had seen an uptick of 5.6%, suggesting a floor to demand may have been reached. However, that uptick has since been reversed with Q3 impacted by the slower summer months and lack of bigger deals – with only one deal bigger than 500,000 sq ft and only twenty-four deals in total (on average Q3 has seen 44 deals over the last 10 years).

Activity was noticeable from the 3PL’s with EVRi taking three units in Sheffield, Avonmouth and Lutterworth with distributors generally accounting for 39% of the deal volume. The retailers accounted for the largest share of deals with retailers accounting for 44% by deal volume. Tesco at Mountpark Hinckley (491,000 sq ft) and B&M Retail at Link 674, Ellesmere Port (674,264 sq ft) the two standout deals.

A current theme ‘deal friction’ – the time taken for transactions to complete; DTRE are currently tracking close to 9 million sq ft of units that are under offer, of which over half were under offer at the end of Q2. 

In a normal cycle we would have expected these deals to have concluded and added close to 4.5 million sq ft to the total – which would put overall volumes ahead of 2023 (18.2 million sq ft) and the pre-Covid average (21.1 million sq ft).

The DTRE Big Box Vacancy rate (all units over 100,000 sq ft) has remained stationary at 6.8% through the quarter. Vacancy rates have remained unchanged overall even though new build supply is falling because tenants are ‘upscaling’ - they continue to vacate older second-hand units and occupy new and better units. New build units now represent only 35% of total supply - down from over 40% in the previous quarter.

New speculative developments; there is currently only 8.19 million sq ft under construction, of which 6 units (39% by square foot) are in units of over 400,000 sq ft and 39% are due to complete in the remaining three months of this year.

There is just 5 million sq ft of speculative developments to be delivered in the next 12 months – which without any further additions would be the lowest level of speculative completions since 2017 (4.8m sq ft). Even with significant additions 2025 looks set to be well behind the 12.6 million sq ft we’ve seen on average in each year from 2018 – 2024.


Rental growth has remained elevated, despite the effects of inflation fading, ensuring ‘real’ rental growth is being delivered to the sector. In the twelve months to August 2022 distribution warehouse rents grew 14.2% before falling to 6.3% by September 2023.

Rental growth has remained in that range for the subsequent 12 months and at the end of August ’24 annualised rental growth was 5%. However, at the same time the consumer prices index measure of inflation (CPI) has fallen from 11.1% in October 2022 to 2.2% for year to end August 2024.

There is a renewed sense of optimism that we are moving off the bottom and a new cycle is about to begin. The Bank of England’s 25bp rate cut was a positive step but was already ‘priced in’. The next cuts should provide confidence, as the pricing on 5-year swaps and 10-Year gilts move towards sub 3.5% and 3.8%, respectively. Significant dry powder continues to target the sector, and with supply set to fall in 2025, and rents likely to rise, buyers conviction should return.

Q3 saw £1.2 bn of deals complete, with the largest transaction in the sector being Prologis’ purchase of Western Avenue Business Park for £125.05 million from DTZIM, and marking their first significant deployment in over a year. The largest single asset transaction was Pontegadea’s 1st purchase of a UK logistics asset at SEGRO Park, Heathrow for £65.5m. The largest portfolio was Mirastar & KKR’s purchase of Project Tournament a collection of five single let “Big Box” assets for £115.25m. DTRE advised the purchasers on all three transactions.

The £1.2 bn transacted in Q3 has resulted in volumes reaching £4.4bn by the end of September, 8% ahead of the pre-Covid average (2010-19). Of note is that this is the first quarter of the year where volumes were not supported by large M&A activity, with five deals over £50m equating to 44% of the volume during the quarter. 

The further anticipated rate cuts should help grease the wheels of the capital markets, with 5-year swaps now trading at 3.6%, down from 4% in early June and the cost of debt on good quality logistics assets shrinking by c.120 bps since the start of Q2’24.

However, whilst Q4 will likely be busier, typically there remains a 25bps ‘bid/ask spread’ – with core investors starting to return we are seeing the return of competitive tension and the potential for that gap to start closing. Outside of the Big Box sector we have seen examples of this with reversionary mid box schemes trading in the low to mid 3’s.

DTRE Big Box Logistics Report - Q3 2024

This report provides a comprehensive analysis of the relationship between sustainability credentials, rental growth, and investment value within the industrial and logistics market. By examining data from 133 million sq. ft. of leasing transactions, conducting a solar survey with 20 companies, and engaging 125 participants across 80 firms in a sustainability survey, we uncover key insights into how sustainable practices impact asset performance. 

The findings reveal that properties with strong sustainability credentials not only attract higher rents but also deliver greater investment value and resilience in the market. This report serves as an essential guide for investors and developers, offering practical tips and insights into ways investors and developers can capitalise on the evolving landscape.

Investors are becoming sustainable investment intelligent, with 74% considering ESG in every transaction and 56% costing decarbonisation pathways during acquisitions. 

Despite no legislative pressure, the market is targeting Green+ refurbishments driven by perceived rent and yield premiums.

The rental premium between EPC A and B is widening, but there is no premium for EPC A+.

The rise of green capital is not only targeting prime assets, offering a yield improvement of 10-25 bps but also paying a premium for assets that have a clear decarbonisation strategy.

Net zero pressures have redefined the transaction process, 70% of purchasers are requesting consumption data during transaction due diligence. 

Power is the biggest challenge to the industry, 59% of developers have abandoned an acquisition due to power concerns.

Flood has been identified by 83% as the greatest physical risk but climate-related risks are not considered a priority.

The Industrial & Logistics Sustainability Handbook

5 Things You Need to Know About Science & Technology in the Golden Triangle

Laboratory leasing activity across Cambridge in the opening half of the year reached 52,500 sq ft, falling 40% from the highest H1 recorded in 2023 (87,400 sq ft) but positively remaining 20% above the H1 5-year average (41,600 sq ft).

Take up was led by lettings at Unity Campus as Welbeck Health Partners leased 31,000 sq ft at Orion, and ViaNautis (Soma Serve) secured 10,800 sq ft of fitted space at Cadence, also on the park.

At the close of H1, there was a further 31,000 sq ft under offer which we expect to complete in Q3.

Demand for laboratory space remained robust in Cambridge, with 783,000 sq ft of named demand at the close of H1. Of this, 478,500 sq ft is active demand and 304,500 sq ft is upcoming demand, with the majority temporarily put on hold due to wider macroeconomic uncertainties.

We have seen an increase in 50,000 sq ft + requirements coming live, more than in the rest of the Golden Triangle, now representing 38% of demand. Importantly, we are also still seeing the growing demand for smaller, fully fitted laboratories by occupiers looking to take turnkey space, with requirements of up to 20,000 sq ft representing 20% of demand.

This change in demand profile underscores the importance of providing a variety of fit out specs to appeal to the broadest range of demand/occupiers.

At the end of H1 there was 151,000 sq ft of available up-and-built laboratory space, with the majority located within the southern Cambridge cluster across Granta Park, Babraham Research Campus, The Press, and Unity Campus.

Excluding the southern cluster, there is practically no up-and-built laboratory space available for immediate occupation in Cambridge, maintaining a strong supply-demand imbalance.

In response to this supply-demand imbalance, there is 4.7 million sq ft of laboratory-led space due to be delivered by the end of 2028. Of this, 17% (799,600 sq ft) is currently under construction or being repurposed which will help alleviate the supply restraints in the short term and support leasing activity across the next 12 months. 18% of the pipeline however is still subject to planning.

With demand continuing to outweigh supply, rental growth prospects remain strong, with several schemes providing fitted space quoting over £70.00 per sq ft.

£119 million was raised by 46 life science and biotech companies based in Cambridge across H1, a 28% decrease on venture capital raised in H1 2023.

Whilst the sluggishness of venture capital funding has persisted into H1 2024, the wake of the election and the improving economic landscape should recover sentiment and motivate investment into these companies. It will also encourage companies that have successfully raised to satisfy their space demands.

Since 2019, Cambridge-based companies have collectively raised £3.6 billion - capital that will be directed into real estate once the climate steadies.

Laboratory take up in Oxford throughout H1 2024 reached 77,100 sq ft, 22% above take up across Cambridge and London combined.

At the end of June, there was a further 29,800 sq ft of laboratory space under offer, with 57% having already transacted at the beginning of Q3. If the remainder of this space completes, take up in Q3 looks to be in line with the 5-year average take up across the third quarter (31,500 sq ft).

Take up in H1 was led by the Ellison Institute leasing 27,800 sq ft at Winchester House on The Oxford Science Park, and OrganOx taking 17,700 sq ft of space on an assignment at Building 3500, ARC Oxford.

Further leasing activity in the second half of the year will be driven by the 451,200 sq ft of named demand for laboratory space, of which 332,000 sq ft is active. Of this demand, 48% is for space smaller than 20,000 sq ft, with 38% for space from 20,000-50,000 sq ft, and 13% for space over 50,000 sq ft.

At the end of H1 there was 282,000 sq ft of available up-and-built laboratory space in Oxford, with just 45,400 sq ft of this in the city centre, and the remainder across Milton Park, Abingdon Science Park, The Oxford Science Park, and Begbroke Science Park.

There is 898,600 sq ft of space currently under construction/refurbishment, with 23% (205,000 sq ft) of this space already accounted for.

Of the 4.8 million sq ft we are tracking to be delivered by the end of 2028, 31% (1.5 million sq ft) is to be built in the city centre.

Fitted laboratory rents in Oxford have increased to a new headline rent of £82.50, achieved in Q1 at the Sherard Building on The Oxford Science Park as Oxford Nanopore leased 13,000 sq ft of fully fitted space.

32 Oxford-based life science and biotech firms raised £263 million through fundraisings and grants in H1 2024, reaching 9% above the pre-covid full-year 5-year average. Overall, Oxford-based venture capital was the most consistent out of the Golden Triangle, falling the least from the total raised in 2023.

Despite this, Oxford-based companies have similarly echoed the theme seen across the wider Golden Triangle in their hesitancy to exercise their capital on real estate, with many choosing to remain in their current space until the macro environment settles before expanding or upgrading.

Since 2019, Oxford-based companies have raised £3.4 billion, which will slowly be released as sentiment improves and several tenants that have previously put expansion plans on hold reactivate their search.

London laboratory take up slowed in the first half of 2024 with 10,300 sq ft transacting, 70% below H1 take up last year despite Q1 2024 being 42% above H1 2023 take up (7,300 sq ft). This leasing slowdown can be attributed to the relatively nascent state of the London market and the high quoting rents.

London is the most embryonic of the Golden Triangle markets, so with national and economic unrest and uncertainty over the past year, it has not been able to rely on its deep-rooted and pre-existing markets to the same extent that Cambridge and Oxford have been able to, hence experiencing the impacts of a lack in confidence more heavily.

This was further evidenced in take up by deal size, with all deals occurring for space less than 5,000 sq ft. The largest deal by size occurred at Paper Yard, Canada Water, with Prosemino taking 3,000 sq ft of fully fitted space in Q1.

A further 11,100 sq ft of laboratory space was under offer at the end of June. With additional fitted laboratory space already going under offer early into Q3 we look forward to a positive turn in the second half of the year.

This will further be driven by the 752,200 sq ft of named London laboratory demand, of which 636,200 sq ft is active. Of this demand, 3 requirements are for 50,000 sq ft +, corresponding to 47% of demand, with 28% of demand for space less than 20,000 sq ft, and 26% for space between 20,000–50,000 sq ft.

Science & Technology Report: Golden Triangle - Q2 2024 

5 Things You Need to Know About Big Box Logistics In Q2 2024

Cautious optimism has returned to the Big Box logistics market in the last three months, with some big requirements providing a boost to take-up numbers and the slowdown in development completions ensuring that the vacancy rate is now on the turn.  DTRE expects this positive momentum to carry on through the remainder of the year.


Take-up in the second quarter has reached 6.35 million sq ft, which is up 11% quarter-on-quarter and at the halfway stage of the year, 2024 is in-line with 2023’s 12.1 million sq ft. The second quarter has seen some big occupiers finally sign for space, such as Nike taking 1.3 million sq ft at GLP’s Magna Park Corby scheme, which has boosted the overall take-up number. We also witnessed 7 deals for units of greater than 300,000 sq ft – which is more than any other Q2 outside of the Covid years. 

As a result, we are now seeing some take up momentum for units between 300-400,000 sq ft, which at the turn of the year accounted for nearly a third of all Grade A supply. Deals at Ergo 354 in Fradley (Super Smart Services), Unit 1 Orwell Logistics Park (EDF Energy) and MPS9 Magna Park South Lutterworth (CEF) have all helped in both boosting take-up and reducing the vacancy rate.

However, take-up of units between 100-300,000 sq ft was just 2.3 million sq ft in Q2 - that’s 29% down on the pre-Covid average. Furthermore, second-hand units of between 100-200,00 sq ft saw virtually no lettings at all, which we believe reflects the preference for newer, sustainable, and future-proofed assets.

The DTRE Big Box Vacancy Rate stood at 7.2% at the end of Q1, but we are pleased to report that has trended downwards over the last three months and now stands at 6.8% at the end of Q2 with 4.26 million sq ft of take up of standing stock, reducing overall supply to just over 51 million sq ft. The ‘split’ is now 21 million sq ft ‘New/Spec Built’ and 30 million sq ft classified as ‘Second Hand’.


We can also report that the continued slowdown in new speculative completions, and this, coupled with the existing unsatisfied occupier demand will ensure that downward pressure on vacancy rates will continue for  12 months at least given the structural delay required to implement new build starts on site.

Currently there is approx 8 million sq ft of existing warehouses under offer and whilst it’s difficult to forecast the extent of further second-hand or grey space being added to the market, there’s only 960,000 sq ft across 6 units of new development, all between 102,000 sq ft and 240,000 sq ft, that will reach practical completion by the end of Q3. As a result, we expect the vacancy rate to compress further to 6.3% by the end of September.

MSCI’s latest Monthly Index showed rental growth for distribution warehouses was just 0.23% in May (annual rate of 5.7% to end May), which is the lowest monthly level since peak-lockdown in January 2021 and unsurprising given the hike in the vacancy rate over recent months. But with vacancy now on the turn, development slowing and occupier demand, particularly for ‘New/Grade A’ product on the rise, we expect to see rental growth pick up once more from here on for the remainder of 2024. Despite the statistics, DTRE have continued to experience strong rental growth in core markets at beyond these levels. 

At the end of the quarter some cautious optimism has returned to the capital markets. Sentiment is starting to improve and in a few limited examples competitive tension has returned. One Swallow does not make a Summer – perhaps it may make an Autumn? With the likelihood of a new government and with the Bank of England expected to cut rates in either August or September, we expect the ‘Bid/Ask’ spread which has held back the market for much of the year to narrow and a busier second half of the year will unveil with increasing levels of stock expected.

Q2 saw £1.8 bn of deals complete, with the largest transaction in the sector being Tritax’s purchase of Abrdn’s UKCM which included c.£270m of logistics assets. The largest single-unit deals saw Ceva Logistics purchase its own warehouse at Rockingham Gateway from Mulberry for £78m, whilst M&G sold a Co-Op distribution unit in St Helens, just outside of Liverpool, to Brookfield for £59m/5.79% NIY. 

At £1.8bn, trading volumes in Q2 have increased 63% on what we saw in the first three months of 2024, and this cautious optimism is largely mirrored in the bond and swap markets. 5-year swaps are now priced at 3.95%, down from the 4.1% - 4.2% range where they have spent most of Q2 with a similar story playing out in the bond market for UK 10-year gilts, as investors price in interest rate cuts as inflation has tumbled down to its 2% target.

Pricing has remained firm through the quarter, particularly for assets with reversion and with little to no sign of distress in the sector, a phenomenon hopefully confined to the US and office sector, we expect both direct pricing and valuation yields to remain stable for the remainder of the year, with some inward movement for assets with open market rental mechanisms.

In fact, the ’Bid/Ask’ spread, which has narrowed marginally during Q2 should continue to see the gap close over the forthcoming quarter as swaps (5-year) and gilts (UK 10-year) dip under 3.9%. This could unlock a number of deals, including some larger deals and portfolios which have continued to be conspicuous by their absence.

Finally, and surprisingly, (and unlike in France) the UK’s general election has not seemingly spooked the investor community this time around, as it has done in the past, with investors much more focused on the latest CPI print and the bank rate, rather than whether it’s a Labour or Conservative government.

To that end, we don’t expect to see any disruption caused by a change of government. Indeed, if Labour, who are on average 20 pts clear in the polls, do form the UK’s next government then their proposed reform of the planning laws, intended to promote housing development, should also be seen as an unintended boon to logistics.

DTRE Big Box Logistics Report - Q2 2024

5 Things You Need to Know About Offices, Science & Technology in Cambridge

Take up of lab and office space in Cambridge reached 202,700 sq ft in Q1, the highest Q1 on record, and a 43% increase on the 2023 opening quarter of 141,700 sq ft.

Lab take up alone reached 51,400 sq ft in Q1, the highest opening quarter for lab take up in Cambridge to date - c.4.5 times on Q1 2023 of 11,500 sq ft, and 7.5 times on the Q1 5-year average (2019-2023) of 6,800 sq ft.

Lab take up was dominated by Welbeck Health Partners taking 31,000 sq ft at Howard Group’s Unity Campus as shell and core space on a 30-year lease, and ViaNautis securing 10,800 sq ft of fully fitted labs at Cadence, also at Unity Campus, for a term of 10 years.

In terms of demand, we are tracking 708,000 sq ft of named lab demand in the market, of which 483,500 sq ft is for live, active requirements. Of this total named demand, 72% of requirements are for space smaller than 30,000 sq ft, and 31% for less than 10,000 sq ft. This breakdown reflects an increased number of smaller lab requirements, a theme we are seeing across the Golden Triangle, but it is important to note that Cambridge does currently have more 50,000+ sq ft requirements than either Oxford or London, with four 50,000+ sq ft active lab requirements alone - a testament to its more established market.

Lab activity remains constrained, with just 97,000 sq ft of up-and-built lab space available at the end of March, the majority of this being located within the southern Cambridge cluster – notably Babraham Research Campus, Granta Park, Unity Campus, and Chesterford Research Park. With current interest being expressed on some of the space, the supply-demand imbalance will maintain upward pressure on rental levels during the course of the year.

Additional lab supply totalling 190,000 sq ft is on track to be delivered over the next nine months, with the completion of 1 Granta Park by BioMed Realty and the refurbishment of the former AstraZeneca building at 310 Cambridge Science Park. Interestingly, two office-to-lab conversions will also come on stream – Longfellow’s re-purposing of the first building at CamLIFE and the conversion of a 2 storey office at 316 Cambridge Science Park into a 50:50 lab:office. 

Following the completion of 1 Granta Park, Mission Street's 60,000 sq ft second phase of The Press at Foxton will be delivered at the end of the year and Abstract’s South Cambridge Science Centre will provide brand-new purpose-built lab space in Cambridge, delivering 138,000 sq ft by Q2 2025.

There has been a decrease in venture capital received by life science and biotech companies in Cambridge this quarter, with £58 million raised, down 68% on £180 million, the average raised across each quarter last year. Despite the venture funding slowing in the past quarter, these raises will still positively add to the growing pool of capital waiting to be deployed into the market once macroeconomic conditions settle further and confidence grows.

The office market led transactions in Q1, making up 75% of take up and totalling 151,300 sq ft, with most deals falling into the opening quarter after being under offer at the close of last year. This represents a 16% increase on recorded take up for the equivalent period in 2023 of 130,200 sq ft, and 73% above the Q1 5-year average (2019-2023) of 87,500 sq ft.

The two largest deals of the quarter occurred at Cambridge Science Park as AMD took the assigned 44,600 sq ft Napp Pharmaceuticals lease at Building 196, and Cambridge Mechatronics signed for 21,000 sq ft at Building 306 on a 10-year term. Further at the park, Pragmatic Semiconductor expanded by 13,700 sq ft within Building 400 to now occupy the whole building for a 10-year term.

Other notable deals include Power Integrations leasing 14,400 sq ft at Orchard Street’s Radio House for 10 years, and Five AI taking 5,500 sq ft at Fora, 20 Station Road at a rent of £100.00 per sq ft all-inclusive.

Demand for offices continues albeit at a more subdued rate compared to the science and tech sectors, with named demand tracked at 339,000 sq ft. Of this demand, 91% of requirements are for spaces smaller than 30,000 sq ft, with 61% for spaces less than 10,000 sq ft with much of the demand for small suites centred on the key city centre locations on Hills Road and Station Road. Occupier downsizing and the flight to quality are still very much continuing trends throughout Cambridge.

This quarter, overall office vacancy reached 7.6%, with 572,700 sq ft of office space* available across Cambridge, down from 8.8% last quarter. 60% of availability was in the North Cambridge cluster, with the Crown Estates’ Building B and Newnham House at Cambridge Business Park offering 42,500 sq ft and 42,900 sq ft of Grade B office space, respectively. 

There was 215,800 sq ft of Grade A office space* available at the close of Q1, equating to a 2.9% vacancy rate, remaining in line with last quarter. City centre Grade A supply remains tight with only 107,900 sq ft available at Brydell’s Generator on 42 Newmarket Road, 10 Station Road, Fora at 20 Station Road, and Brooklands, which completed this quarter, with 28,000 sq ft already pre-let to Siemens.

According to DTRE Research, the 5-year average quarterly average Grade A office take up (2019-2023) stands at 74,500 sq ft. With just 215,800 sq ft of available Grade A office space in Cambridge, there is under nine months of Grade A office supply remaining.

Despite strong activity on the occupational front, there were no investment transactions for offices and labs across Cambridge in Q1.

The themes we identified at the close of 2023 are still in play, where negative sentiment still surrounds the shifts in working practices, hesitancy due to macroeconomic conditions continues to linger, despite the UK economy appearing to turn a more positive corner, and planning challenges across Cambridge persist.

In the office market, we are seeing the dislocation of investor sentiment with the market facts. We are recording strong fundamentals, with demand remaining strong, take up reaching 73% above the Q1 5-year average, and low supply figures helping to push the rental tone. In light of the above, 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 historic transactions for up-and-built lab buildings, we are confident in a more positive second half of 2024 for the science and technology capital markets, as we expect the trading of the first stabilised lab buildings in Cambridge to occur. The lack of this product in the market should attract strong investor demand and will inject confidence into the science and technology market.

Office, Science & Technology Cambridge Market Report – Q1 2024

5 Things You Need to Know About Big Box Logistics In Q1 2024

The occupational market has got off to a sluggish start in 2024, with a combination of factors ensuring that the quarterly volume for new lettings reached just 5.6 million sq ft, that’s down 16% quarter-on-quarter and the slowest start to a year since 2019. However, there remains reasons to be positive as we move into the second quarter. 

Whilst the slowdown in occupier demand can be attributed to a number of macro-economic factors, ‘transaction friction’ has also increased significantly. Legal and ESG due diligence processes appear to be the main contributors, although C-Suite decision making is slower than it has been.

However, DTRE are currently tracking 7.6 million sq ft of logistics units that are under offer and should all those units complete by the end of June 2024 then take-up for the half-year will be 10% ahead of the “Pre-Covid” average.

Looking at Q1, the Midlands led the way accounting for almost 60% of all demand, split 40% East Midlands and 19% West Midlands, with Yusen Logistics’ 1.2 million sq ft pre-let at SEGRO’s Northampton Gateway accounting for 47% of the Midlands total.

In total, twenty-two deals signed across the first three months of the year, with 100,000 - 300,000 sq ft being the most popular building size, accounting for 77% of take up. Positively, particularly given the availability of assets in the 300,000 sq ft size bracket, take-up for bigger units was 14% ahead of the “pre-Covid” quarterly average (2007-19).

The level of supply and in-turn the vacancy rate has continued to creep up at the start of 2024, albeit it at a much slower rate than we saw throughout 2023. By end Q1 2024, the DTRE Big Box Vacancy Rate had only reached 7.2% up from 6.9% at the turn of the year.

However, we believe this will be the ‘peak’ vacancy and that the headline rate will trend downwards through the remainder of the year. There is only 7.6 million sq ft of new speculative development due to complete in 2024 – this will be the lowest level of new speculative completions of Big Boxes in seven years.

At the end of 2023, there were 24 assets available in the 300,000-400,000 sq ft size range; encouragingly 5 units are now under offer and with no significant new supply expected, this sector should see further decreases as the year progresses.

Finally, rental growth continues strongly and is being driven by the demand/supply dynamics that have underpinned industrial and logistics for the past ten years, rather than inflationary pressures. The latest MSCI Monthly Index for end March showed annualised rental growth of 6.9% for the industrial sector (see below).

Whilst rental growth had tracked closely with the UK’s CPI for much of 2023, by autumn it had de-coupled,  and we are now seeing real rental growth of 370 basis points over the latest annual CPI number of 3.2% for March.

The themes that have dominated the capital markets for the last twenty-four months continue to persist and whilst bouts of optimism have appeared over the first three months of the year, they have also receded just as quickly, as capital sits on the side lines awaiting a definitive signal from the world’s central bankers.

The result of this hesitancy in the capital markets has meant that just £1.1bn of industrial and logistics has traded over the quarter, down 21% on the 10-year ‘pre-Covid’ average (2010-19). Larger transactions and portfolios remain largely off the radar, and this is reflected in the fact that only four deals occurred over £50m in the quarter.

The biggest deal of the quarter saw the US fund manager Ares (advised by DTRE), purchase Project Armitage, a highly reversionary 1.84 million sq ft portfolio from Royal London for £175m/5.5% NIY in an off-market transaction. Elsewhere, the industrial & logistics apportioned pricing for the LondonMetric/LXI merger helped boost the end quarter volume by a further £163m.

Whilst the UK economy has turned a corner and the threat of a prolonged recession is in the rear-view mirror, the bond and swaps markets tell of the bumpy path endured year-to-date as well as providing a pre-cursor to what lies ahead. 

At the start of the year and on the back of the US Federal Reserve signalling they were likely to undertake four rate cuts during the course of 2024, UK 10-year bond yields were trading at 3.4%, however, as the prospect of both a) when the first rate cut will be and b) how many there’ll be this year, the UK 10-year has moved upwards and now stands at 4.3% (17th April).

The swaps market tells a similar story, with 5-year swaps at 3.5% at the start of 2024 and now standing at just a nudge over 4.1% (17th April).

Whilst corporate activity in the listed sector is on the rise - as undervalued businesses receive attention from bigger players seeing an opportunity to create scale - in a pure property transaction sense, the shift in bond yields and swap rates since the start of the year has meant capital has been hesitant, particularly for the bigger ticket lot sizes. Unfortunately, we expect more of the same ‘wait and see’ approach for the next 3 months at least, with transaction volumes remaining depressed whilst the ‘bid/ask’ spread remains too wide.  

Significant dry powder continues to admire the sector, and with the Big Box vacancy rate about to turn a corner, real rental growth continuing and a 25 bps cut to interest rates to come in Q3, we remain hopeful of a busy end to the year.   

DTRE Big Box Logistics Report - Q1 2024

In Q4 alone, combined lab and office take up in Cambridge reached 243,700 sq ft, lifting total
annual take up to 673,300 sq ft, 16% above the 5-year average. For space over 10,000 sq ft, lab
take up exceeded office lettings by 6.4% (15,000 sq ft), a first for the market.


Named tenant demand for lab space cooled to 790,000 sq ft by the end of the year from
880,000 sq ft in Q3. However, with just 86,500 sq ft of up-and-built bespoke available lab space,
the supply-demand imbalance remains prevalent in the market.


Office take up, whilst ahead of 2022 totals, was restricted by the absence of larger transactions,
with just four occurring for space between 20,000 and 50,000 sq ft. In the absence of larger
deals, the flight to quality over quantity was the key theme in the market, as changes to work
practices continue to see the release of excess space and the transacting of smaller but higherquality product.
Shifts in working practices and other factors have continued to contribute towards negative
investor sentiment surrounding offices, helping to hold back transactional volumes in 2023, with
just £153 million* of deals completed across the office, science, and technology sectors.

Lab take up was strong in 2023, with total take up reaching 282,000 sq ft despite severe
supply constraints across the Cambridge market.

In total, there were nineteen lettings in 2023, up 161% on the 5-year average from 2018-2022, the
highest recorded take up of labs in Cambridge.


The second half of the year saw an uplift in leasing activity with the 85,000 sq ft letting to BioNTech
at 1000 Discovery Drive in December. Of the eleven deals for space over 10,000 sq ft, this was the
only letting above 30,000 sq ft.

This is reflected in the requirement schedules as 67% of the 790,000 sq ft of named demand is
for space below 30,000 sq ft.


Another continuing trend across 2023 was the letting of new or refurbished bespoke wet labs
whilst still under construction. Six of the eleven deals for space over 10,000 sq ft followed this
trend, including the complete letting of 1000 Discovery Drive at the Cambridge Biomedical Campus
to BioNTech (85,000 sq ft) and the NHS (23,100 sq ft); B960 at Babraham Research Campus,
comprising of 36,000 sq ft, wholly let to three tenants at headline lab rents of £66-68.00 per sq ft
before completion; and Domainex, advised by DTRE, committing to 24,300 sq ft at £46.00 per sq
ft in Building A2, Unity Campus.


These deals support the established themes identified in the Cambridge market where the supplydemand imbalance is increasing pressure on available supply, resulting in new supply being prelet or accounted for before practical completion. 


2023 also saw BioMed Realty pre-let 24,800 sq ft of shell and core lab space at One Granta Park
to T-Therapeutics, with good interest on the remainder of the space, as well as signing 21,000
sq ft at the Franklin Building also on the park to F-Star (invoX) for two years, with the existing lab
space taken as is.

In terms of supply, there was 86,500 sq ft of up-and-built bespoke lab space available to
lease at the close of 2023, consisting of 55,000 sq ft of ex-AstraZeneca space at Milstein,
Granta Park, 16,000 sq ft at Phase II Unity Campus, and 15,500 sq ft at Phase I The Press,
Foxton.


Live demand remains comfortably in excess of supply however pressures should alleviate
slightly with the upcoming completions of 110,000 sq ft at One Granta Park in Q4, 40,000 sq ft at
CamLIFE in Q3, and 22,000 sq ft at 316 Cambridge Science Park in Q2, alongside the release of
58,600 sq ft of ex-AstraZeneca space at 310 Cambridge Science Park, also in Q2.


Looking to Q2 2025, Abstract Securities will complete on the largest speculatively built laboratory
building currently under construction in Cambridge. The South Cambridge Science Centre will
comprise of 138,250 sq ft of highly flexible, high quality lab space.


The mid-tech market, however, will see continued stress on supply, with only 151,700 sq ft at
Bourn Quarter Phase II due to be delivered in 2024. Mid-tech is becoming more of a feature
of the market as developers realise the benefits of providing buildings that can accommodate
a diverse range of manufacturing, lab-enabled offices, and GMP space. The provision of a
more flexible offering attracts a broader range of science, tech, and more traditional industrial
occupiers. Accelerator Park in Sawston will build on this momentum by delivering three mid-tech
and R&D buildings comprising 86,300 sq ft in 2025.

Against the backdrop of low supply, the prime headline lab rent in Cambridge remains £71.00
per sq ft, achieved when Charm Therapeutics took 13,600 sq ft at Babraham Research
Campus in Q2. In the same quarter of 2020, Bit Bio set a rent of £43.15 at Babraham Research
Campus, reflecting a 65% rental uplift and an annualised compound growth rate of 18%.

Total office take up in 2023 reached 391,000 sq ft, a 13% increase on 2022’s levels. Despite
this increase, office leasing remained restricted by flexible working ongoing from the peak of
the coronavirus pandemic, falling 17% below the 5-year average (2018-2022).


Of the total, 46% (181,000 sq ft) was for Grade A space, headed by Samsung taking 33,600 sq
ft at One Cambridge Square for 10 years at a headline rent of £38.50 per sq ft, and Raspberry
Pi taking an assignment of the 30,000 sq ft former CMR space at 194 Cambridge Science Park.


Grade A leasing activity remained restricted by a lack of high-quality up-and-built available
space.

There was just 215,100 sq ft of Grade A office space available over 10,000 sq ft at the end
of 2023, with a vacancy rate of 2.9%, further evidencing the demand for top-quality space.


The total availability of office stock over 10,000 sq ft reached 661,600 sq ft at the close of 2023,
reducing the total vacancy rate for all grades to 8.8%, from 9.5% at the end of Q3.


DTRE identified the trend of increased lettings occurring for smaller spaces. Across 67 deals,
82% were for space from 0-10,000 sq ft, 12% in the bracket of 10-20,000 sq ft, and 6% occurred
for space between 20-50,000 sq ft. There were no leasing deals over 50,000 sq ft in 2023.

Occupiers are taking smaller but high-quality spaces as they focus on the quality of the real
estate to attract employees back to the office following the pandemic-enhanced work-fromhome culture.


Despite these pressures on supply, the year ended with a significant amount of office space
under offer – over 142,500 sq ft, of which 67% is Grade A space, reiterating the flight to quality
narrative that DTRE are hearing from occupiers. 


Looking to 2024, we will see the completion of M&G and Wrenbridge’s 68,000 sq ft development,
Brooklands, alongside the delivery of 10 Station Road which will provide 50,400 sq ft by the end
of the year. At the close of 2023, demolition works were also underway as part of Railpen’s
Botanic Place development that will build two office blocks totaling 500,000 sq ft of workspace.

Continued pressures on Grade A space with the flight to quality and ESG pressures on
businesses will encourage the leasing of these new developments, evidenced by Brooklands
already being 41% pre-let.


In addition, we can expect demand for office space to increase through 2024 as companies
continue to solidify their return-to-office plans and incentivise in-office work through their real
estate offerings. 

Investment into the office, science, and technology sectors across Cambridge reached £153
million* in 2023, falling 78% behind the £681 million transacted at the end of 2022.


Transactions were restricted by negative sentiment surrounding shifts in working practices,
increases in material and construction costs, high interest rates, yields continuing to move out, and
planning challenges.

Whilst down on investment volumes seen across 2021 and 2022, the total does remain 25%
above the pre-COVID 5-year average from 2015-2019. Furthermore, there was £60 million
under offer going into 2024 which, if completed in Q1 2024, would be over £40 million ahead
of Q1 2023. 

The biggest deal of 2023 saw UBS purchase an existing office building on a 5-acre site at
Westbrook Drive for £75 million, which will be repositioned as an urban laboratory campus.
Canmoor and Tristan Capital acquired four assets and development land at Dales Manor Business
Park, in the years 2nd biggest deal. Advised by DTRE, the 130,100 sq ft park was purchased for
over £27 million, with an underlying science and technology/mid-tech repositioning opportunity.

£720 million of venture capital funding and grants was raised by 108 Cambridge-based Life
Science and BioTech companies in 2023, 36% on the total raised in 2022, and 13% on the 5-year
average.

 72% of this total (£515 million) was raised in Q3 2023 alone, with Apollo Therapeutics
raising over £180 million in the largest Cambridge-based fundraising of the year.


To date, there has been a lack of transactions for up-and-built laboratory buildings to provide
evidence of prime yields in the sector. With positive venture capital investment into the sector,
moving into the second half of 2024 we expect the first newly built up-and-let laboratory buildings
to trade. Given the lack of ‘best in class’ laboratory stock to come to market to date, we anticipate
strong investor demand for this product, which will in turn secure strong pricing, building confidence in the science and technology investor market. 

Office, Science & Technology Cambridge Market Report – Q4 2023

5 Things You Need to Know About Big Box Logistics In Q4 2023

After three record breaking years, the UK’s Big Box occupational market has reverted to pre-pandemic levels, however, given the macro-economic picture that unfolded during 2023 that is not necessarily such a surprise.

Take up by the end of 2023 was just short of 25 million sq ft and whilst that is down 35% year-on-year, when compared to the long-run ‘pre-Covid’ average from 2007-19, take-up for 2023 is actually up 2%. 

Perhaps more importantly, DTRE are tracking 8.2 million sq ft that is currently under offer as we start 2024, which will provide a significant boost to take-up volumes.


The most dominant sector in Q4’23 (and in 2023 as a whole) remained the retailers, who accounted for just over 51% of total occupier demand in the final three months of the year, with Amazon’s return to the market, securing a site at SEGRO’s Northampton Gateway to develop a new 2 million sq ft facility – an early Christmas present for the market.


Looking ahead, we expect the retailers to continue that trend as the dominant sector. The grocers, including Tesco, Sainsbury’s and Marks & Spencer all have requirements as part of a drive to increase supply chain efficiency, and we expect Amazon are on the cusp of a significant return in 2024.


Whilst manufacturing enjoyed a strong Q3 last year, that uptick was not sustained in Q4, with just five transactions totaling 600,000 sq ft. Given the latest PMI and GDP numbers from the manufacturing sector, we would be a surprised to see above trend demand from that area of the market in 2024 (see Fig 2).


Turning to supply and vacancy, the supply of Big Boxes has continued to rise throughout the year, with 15 million sq ft (64 buildings) of new speculative developments completing across the UK together with a further 8 million sq ft of ‘grey space’ added to the supply schedules. The effect is that the DTRE Big Box Vacancy Rate has risen all the way to 6.85% by end 2023, up from just 3.5% twelve months ago.

The statistic is that 36% of the UK’s entire Grade A supply (in 24 buildings) is of between 300,000 and 400,000 sq ft.


However, on a positive note, last year’s pricing correction and construction price rises have ensured no supply increase, and so we anticipate that 

the current vacancy rate of 6.85% will be the peak of supply, with only 5.7 million sq ft of new speculative development is due to complete in 2024.

This will be the lowest level of new speculative completions of Big Boxes since 2017.