According to Savills, take-up in Cambridge hit 185,564 sq ft in Q4 2022, of which 151,00 sq ft was office space and just under 15,000 sq ft was for laboratory accommodation. Whilst this was an increase of over 120,000 sq ft on the previous quarter, figures remain lower than 2021 as levels of supply remain critical.
Overall, Savills saw the total take-up for office and lab space in 2022 drop by up to 35%. At present, vacancy rates for labs stand at 0.57%, with just 15,000 sq ft of fitted space currently available, albeit 11,518 sq ft of it is currently under offer. Whilst office vacancy rates are higher at 8.69%, there remains only 708,000 sq ft of existing Grade A and B stock.
Notable transactions in 2022 included a public sector occupier taking 25,747 sq ft at 72 Hills Road, Redgate Software leasing 22,000 sq ft at Cambridge Business Park and a 27,000 sq ft pre-let at Brooklands to Siemens on Clarendon, which is currently under construction.
As a consequence of tight supply, Savills anticipates that headline rents are likely to exceed £60 per sq ft for prime city centre office space. Similarly, rental levels for fitted labs are also set to surpass £60 per sq ft on the well-established science parks.
In regards to future pipeline, Cambridge will not see any significant development until 2024, except for the delivery of 88,000 sq ft of laboratory space at The Howard Group’s Unity Campus in South Cambridge this year. Consequently, take-up will remained constrained for at least another 12 months. What’s more, there are still challenges in terms of delivery with uncertainty over construction costs and investment yields potentially resulting in further delays into 2025.
Looking ahead, Savills expects demand to remain broadly consistent with 2022 which saw requirements total circa 1.76 million sq ft. However, the firm notes that larger requirements may look to reduce or revisit these at a later date as businesses rationalise in the face of economic headwinds.
Mark Taylor, head of commercial at Savills Cambridge, comments: “2022 did see a drop in activity across Cambridge, but this can be attributed to the ongoing lack of supply. Occupationally, we are still seeing the global trend of a flight to quality, but with limited availability of premium space requirements are being left unsatisfied and in some cases businesses have had to compromise by taking lower grade stock.
“This presents an opportunity for landlords who will need to look at both the refurbishment of existing buildings and the conversion of offices to laboratory accommodation to benefit from speed to market. Those willing to speculatively build fitted lab space will likely be successful, especially if delivered in 2023. With most Cambridge occupiers being in the innovation sector, requirements are driven by organic growth, usually on a much shorter timeline.”
Emma Morton, director in the Savills occupier services team, adds: ‘Occupiers are taking a fresh look at the role and purpose of their office space and are becoming increasingly discerning when it comes to making real estate choices. Driving these decisions is a need to support hybrid working policies, create an inclusive workspace, the ability to fulfil ESG requirements, all whilst reducing running costs. However, current market conditions in Cambridge are such that it is essential to start early when reviewing workplace strategy and property requirements in order to satisfy these demands.’