Oxford: supply constrained?

Examining the current state of the Oxford market

Oxford’s global reputation for education and innovation has grown significantly during the past few years, accelerated by the obvious recent successes of vaccines for Covid-19 and potentially malaria. Arguably at a distance behind Cambridge a few years ago, Oxford is now a location that has significant development prospects, an enviable reputation and real estate opportunities on par with Cambridge, London or any international rival.

The commercial market

The key driver of significant real estate demand in the short-to-medium term is the richness of the ‘ingredients’ of the Oxford ecosystem. Markets with strength in science and technology are a key focus for investors, but in Oxford the supply of appropriate commercial floorspace against the scale of demand has shown a mismatch.

As we pass the end of Q3 2022, figures for commercial offices and laboratory take-up in Oxford illustrate that nearly 273,000 sq ft of floorspace has been occupied, so far this year. Of this, just over 77,500 sq ft was laboratory take-up.

Constrained housing delivery in Oxford

In many respects, Oxford’s housing market is a victim of the city’s success. The city has enjoyed strong population and employment growth over the last twenty years, which has generated economic prosperity but also created high demand for housing. Housing supply, however, has failed to keep up. Limited land availability and too few new homes have caused considerable problems in the city’s housing market.

The scarcity of homes in the face of strong demand has led to extremely robust price growth in Oxford. This level of price growth has far outstripped growth in local incomes, creating serious issues around affordability. Would-be first-time buyers are increasingly priced out of the market, unable to raise a sufficiently large deposit to buy a home in Oxford. To some extent, buyers priced out of the sales market are relying on rental accommodation instead, causing the Private Rented Sector (PRS) to grow rapidly.

However, against this backdrop, the city as an urban area is increasingly starting to expand outside of its administrative boundaries following the latest round of Local Plan reviews which have substantially increased the allocated land supply for both housing and commercial space, particularly on the edge of Oxford in the adjoining authorities of South Oxfordshire and Cherwell. The effective delivery of these areas is key to maintaining a dynamic economy and future success of the city.

Key takeaways

• Overall, Oxford enjoys an enviable position from which to preserve its reputation as a centre of academic and industrial excellence, and to play its part in creating jobs in forward-looking, high-growth sectors.
  
  
• The supply of appropriate commercial floorspace in Oxford to cater for the scale of demand has shown a mismatch. The supply is currently low, but our research suggests this will improve during the next few years.
  
  
• Despite strong economic and population growth in Oxford, housing supply has failed to keep up with demand. Limited land availability and a lack of new home delivery have caused considerable affordability problems in the city’s housing market.

_{Read the articles within Oxford: A global competitor below.}