In the latest in our valued insights series on Life Sciences we have a very brief snapshot of the current market in Cambridge.
Background to Cambridge’s success
There is no surprise during the crux of the pandemic certain property markets outpaced others and Cambridge was certainly one of the top performers. A key reason for its success is the types of occupiers and businesses associated with Cambridge. Cambridge’s University sits within the top six Universities globally (Times Higher Education World University Rankings 2021), providing it with global appeal which was even more focussed due to Covid-19. Much of the office occupation and laboratory take up feeds off this global reputation for excellence and readily available high calibre talent pool.
Cambridge’s world class status is further enhanced by being part of the ‘Golden Triangle’, which encompasses Oxford, Cambridge and London, and is primarily driven by the outstanding Universities (Oxford University, University College London, Imperial College, Cambridge University). We believe the ‘Golden Triangle’ to be one of the largest knowledge-clusters in Europe.
The UK Government has had the foresight to ride the crest of this wave and has committed to developing a new spatial framework for the Oxford-Cambridge Arc aimed at supporting sustainable economic growth for the area. Forecasts on the Gov.uk website suggest by 2050 economic output could grow by between £80.4billion and £163billion per annum. In addition, improving rail connections between the Cities via the ‘Varsity Line’ would help significantly albeit there is no set timeframe on this project at the time of writing.
Context – in-town v out-of-town
The Cambridge market is split between in-town and out-of-town. The in-town market is centred around Cambridge station, where offices are situated along Station Road, known as the CB1 Estate. There has been significant inward investment into the area and the development along Station Road has been transformed in the past 10 years by Brookgate who have provided over 250,000 sq ft of office accommodation. Occupiers in the city centre are more tech focussed or traditional business services/financial services orientated and include Amazon, Mott MacDonald, Birketts and Microsoft. More recently Aviva are funding a new building (20 Station Road) which is pre-let to Fora, a high-end flexible workspace provider which is estimated to be opened in 2023. This was the largest transaction in the city centre in 2020 (65,000 sq ft). CBRE research shows prime rents in the City Centre now stand at £49.50 per sq ft and are forecast to reach £53 per sq ft by 2024.
The out of town Cambridge market has a more business park and science park orientation which includes (to name but a few) Cambridge Science Park, Granta Park, Babraham Research Park, Cambridge Research Park and Cambridge Biomedical Campus. Here there are far more Life Science and tech occupiers situated, such as Illumina, Heptares, Astra Zeneca, Astex Therapeutics, Gilead Sciences and Napp Pharmaceuticals. Single owned Science Parks and business parks provide scale which in turn gives owners the ability to create an ecosystem for their tenants, albeit Cambridge Science Park which is owned by many different investors still has the ability to create a synergy across the park. The significant benefit of the Science and business park offer is they can usually provide companies with the full lifecycle experience, accommodating them from their embryonic stage (incubator suites/labs), to growth (accelerator space) up to maturity (corporate building).
Even with a backdrop of Covid-19 over the course of 2020, there were two deals exceeding 30,000 sq ft transacted in the out of town market; Amgen (35,000 sq ft at Cambridge Science Park) and MathWorks (93,000 sq ft at Cambridge Science Park).
Development – out-of-town
Cambridge has been epitomised in the last 12 to 18 months by a lack of available stock and this is still the case. There are plans for buildings to be completed in the next few years, some examples are set out below.
Planning consent has been granted for 103,000 sq ft at Cambridge Biomedical Campus and will be known as 1000 Discovery Drive, this will be delivered on a speculative basis. Cambridge Biomedical Campus is where Astra Zeneca are developing their new Global Headquarters, which will extend to circa 850,000 sq ft.
Abstract Securities owns 15 acres of development land south-east of Cambridge City Centre where they are seeking planning consent for c.500,000 sq ft of laboratory and office accommodation. They have named the scheme Cambridge International Technology Park and this will be situated adjacent to the already existing Peterhouse Technology Park, owned by University of Cambridge’s Peterhouse College, which is home to Arm Holdings. The first building on site is anticipated to complete in 2023.
Brookgate, in addition to their City Centre holdings, have One Cambridge Square, which will sit within the Cambridge North site, occupying 40 acres adjacent to Cambridge North station. The development will comprise of offices, hotels, shops, leisure and residential.
The Wellcome Genome Campus in Hinxton, Saffron Walden saw outline planning consent granted in 2019 for the development of 1.6million sq ft of commercial space as well as 1,500 homes.
Investment market – out-of-town
There has been significant investor interest in the out of town Cambridge market in the past 6 months, driven by the focus on Life Sciences the pandemic has shone and the underlying property fundamentals which create an exciting story about this sector & location.
Brockton Everlast have acquired seven buildings in two transactions on Cambridge Science Park. We estimate £1.8billion was circling the L&G Investment Management sale of 214 to 240 Cambridge Science Park, which drove pricing at least 50% above the asking price, and close to £100m. This second Brockton Everlast acquisition is very interesting as it provides a mix of opportunities – solid long-term income, shorter/medium term leases with reversionary potential and two redevelopment/refurbishment prospects.
Melbourn Science Park was acquired by Bruntwood Sci-tech for circa £46m, providing a foothold in the Cambridge market for the Joint Venture and offers an income play with an exciting redevelopment or repositioning opportunity in the medium term. Melbourn was acquired from The Technology Partnership (TTP), in a sale & part leaseback, TTP are building their new campus on adjacent land, providing additional cluster and knowledge sharing opportunities.
101 Cambridge Science Park is the latest investment to come to the open market on Cambridge Science Park and in a similar vein to the others, is rumoured to be under offer in excess of the asking price, after a competitive bidding process. The property is let to Citrix R&D, Grant Thornton & Hauwei Technologies R&D and offers a WAULTC of 3.8 years.
All four transactions are leasehold with ground rent payaways.
In summary, Life Sciences has been brought in to focus over the past 15 months through the pandemic but it has played a vital part in the UK and in particular Cambridge’s economies over many decades…and we do not anticipate this changing any time soon.