Michael Jones, Head of Commercial Department at Cheffins says:
“2021 has been characterised by a severe lack of stock across all sectors of the commercial property market. When looking at industrial, office and lab space, all of these sectors have seen a bottleneck of supply within prime Cambridge locations. For offices in particular, demand has remained strong for city centre or park locations. In fact, the city centre is virtually fully-let and there have been a number of significant high value deals this year at Cambridge Science Park. Rural office locations, however, have struggled to find new occupiers, as smaller businesses which previously would have taken up space in out-of-town locations have continued to make the most of hybrid working with many staff working from home. We have seen that confidence is centred on Cambridge itself, with a number of large scale companies which previously had put a hold on relocations and office moves now having returned to the market and on the hunt for new premises. The lab market continues to grow in importance in the local area, and with no space currently available to let, prices have been driven upwards throughout the year reaching levels of over £45 per sqft this year. Cambridge remains the go-to place for some of the biggest players in the life sciences industry and at the time of writing, the supply of lab space in Cambridge is effectively non-existent with all space currently under construction having been spoken for. And whilst this is being addressed with a number of proposals being progressed, this scarcity looks set to continue for at least the next two years due to the time required to build and deliver new space. Demand in the laboratory and office sectors is also being driven by homegrown Cambridge-based companies and spin-outs from the university which have been riding the wave of largescale venture capital investment into their sectors. This inward injection for cash for many has resulted in fast-paced growth which the local property market is struggling to keep up with.
When it comes to the industrial market, demand has continued unabated with price rises month-on-month for the best in class of opportunities. For example, at Bourn Quarter, the region’s largest industrial development, over half of the first phase has now been pre-let and enquiry levels for the reminder of the scheme are very high. Demand is coming from both national and locally-based occupiers as well as last mile delivery companies. Rents for industrial space at Bourn Quarter are now at £13.50 per square foot and this level looks likely to set the tone for other new developments coming forward during 2022.
Whilst many have been concerned about the health of the retail sector post-pandemic, we have been gladdened at its resilience, with successful re-lettings of most of our shop properties in the region, particularly in and around Cambridge. Of course Cambridge’s status as one of the UK’s most popular tourist destinations has certainly future proofed our retail market, and this has also been helped along by sympathetic landlords who understand the changing dynamics in the sector and have adjusted rental expectations accordingly.
Looking ahead to next year, provided the new variant of the virus doesn’t plunge us into yet another lockdown, we forecast that much of the market will continue in the same vein. Cambridge’s issue will continue to be supply, and discounting those new developments which are already underway, it will be another 18 – 24 months before we start to see new stock coming to the market. Delays caused by the planning system, coupled with a chronic shortage of employment land (which looks set to continue following the publication of the South Cambridge/City Combined Authority draft plan allocations recently) will lead to a choking effect on the market and if demand continues as it has in 2021, there is a very real risk that these occupiers which add so much to the local economy may end up looking elsewhere. We need to build lab, office and industrial space and do it quickly, if Cambridge is going to continue to be one of the leading lights in the UK’s economic recovery.”