Office, Science & Technology Cambridge Market Report – Q1 2024
5 Things You Need to Know About Offices, Science & Technology in Cambridge
- Q1 take up reached 202,700 sq ft across Cambridge’s lab and office markets – the highest opening quarter on record
- DTRE are tracking 708,000 sq ft of named lab demand, of which 483,500 sq ft is active, as well as an additional 339,000 sq ft of tenant demand for office space
- There is 97,000 sq ft of up-and-built lab space available in Cambridge, with 215,800 sq ft of Grade A office space also available at the end of March
- £58 million has been raised by Life Science and BioTech firms across Cambridge in Q1
- Capital markets continue to hold out, as no investment transactions occurred throughout the quarter, despite the economy turning a more positive corner
Occupational
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.
*10,000 sq ft+
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.
Capital Markets
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.
