Office, Science & Technology Cambridge Market Report – Q4 2023
5 Things You Need to Know About Offices, Science & Technology in Cambridge
Lab take up reached 282,000 sq ft by year end, the highest on record
The prime lab rent was set in Q2 at £71.00 psf on Babraham Research Campus
Grade A office take up continued to be held back by a lack of up-and-built supply as vacancy fell to 2.9%
Investment volumes were subdued, hitting £153m in 2023. However, this was still 25% ahead of the pre-COVID (2015-2019) 5-year average
Cambridge-based Life Science and BioTech companies raised £720 million through venture capital funding and grants, 36% ahead of the total in 2022, and 13% ahead of the 5-year average
Cambridge Q4 2023
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.
Occupational
Science & Technology
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%.
Offices
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 & Development
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.
