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Comparing the Oxford and Cambridge Commercial Property Markets

Thursday, 04 March 2021

Comparing the Oxford and Cambridge Commercial Property Markets

PAI members VSL & Partners and Cheffins experts in Oxford and Cambridge respectively have joined forces to provide a review of their two markets.  

VSL & Partners and Cheffins have recently published their annual market reports to analyse their local markets and have now come together under the PAI network to work more closely.  

Whether it’s the annual boat race or academic league tables, Oxford and Cambridge are always being eagerly compared.  Cambridge maybe marginally ahead in boat race wins but Oxford has led the TES World University rankings for the last five years.  

In the commercial property stakes Cambridge has an impressive track record which overshadows Oxford both in terms of development activity and rents achieved but as we see below Oxford is catching up quickly.  

Richard Venables, director of VSL explains: “On the face of it, Oxford and Cambridge are very similar.  Equidistant from London, significant University towns conducting world leading research, similar populations and geography impacted by river catchments, constraining greenbelt policy and road infrastructure issues.  

“Digging deeper though there are significant differences.  We always say, ‘brand Oxford place Oxfordshire’ and our economic geography stretches from motorsport valley to the north of the county to Harwell and Milton Park in the south and Witney to the west.” 

Philip Woolner, director of Cheffins adds: “One defining difference has been the speed of commercialisation of intellectual property from research departments and in this respect, Cambridge has been leading the way for the last 20-30 years.  

It is not that there was not activity in Oxford, just that Cambridge got started much earlier in developing its networks and infrastructure, as reported originally in The Cambridge Phenomenon report back in 1985.  

“The stimulus for change comes from many sources including the ambition of the University, the availability of finance to grow companies and a planning environment that can accommodate this growth.”  

Richard says: “In Oxford the rate of spinout growth has accelerated significantly in the last five years which coincided with the launch of Oxford Science Innovation Plc which is now a £680 million fund created by Oxford University and others to invest in the intellectual property emanating from University research departments.  

“Property development patterns have also been very different in Oxford where this has not only been focused on ring road locations but also most significantly Milton Park, Abingdon and Harwell, all located on the A34 knowledge corridor.”  

Philip says: “Cambridge has two local authorities, South Cambs District Council and Cambridge City Council. They saw the potential of growth in Cambridge some years ago and agreed to review the greenbelt allowing for significant development in the immediate vicinity of Cambridge.  More recently we have seen the creation of a Combined Authority headed by a new Mayor which has provided additional focus to the region as a whole. The area around Addenbrooke’s Hospital has been particularly important and is the location of AstraZeneca’s European headquarters.  Combined with this has been the growth of office space around Cambridge train station and numerous science and technology parks within close proximity.” 

Richard adds: “We know AstraZeneca looked at Oxford but soon saw greater opportunities at Cambridge.  By contrast there has been no new office development in Oxford city centre for the last 20 years and for some time our rental levels were trading at approximately half to a third of those achieved in the Cambridge market.”  

VSL and Cheffins now report a closing of the gap between the two markets.  Oxford is seeing rapid growth in the early-stage science and technology market whilst Cambridge continues to attract larger requirements and has had a much more progressive property development market.  

For many years Cambridge achieved office take-up figures of approximately 500,000 sq ft per year although this dipped slightly in 2020 partly due to the lack of availability of stock.  At the same time, Oxford reported a 20% increase in an office take-up recording 324,000 sq ft in 2020 and an increase in demand from the laboratory sector.  

Developers are now responding in Oxford and the first stage has been the ‘re-purposing’ of existing office buildings to provide shell laboratory accommodation but increasingly fitted laboratory space especially for requirements of 5,000 sq ft and less.  

Michael Jones, head of Cheffins commercial division comments: “Our experience in Cambridge has been that occupiers really want fitted laboratory space.  They do not mind paying a higher price as it saves fit out costs and protects against cash burn.  Landlords and developers have become more acquainted with specification requirements in this specialist sector and importantly the investment market has become attracted to this new hot asset class.

“A significant change in 2020 has been the levels of investment pouring into both locations, not just to support the research and development activities but also from property investors with aggressive pricing and bidding on any investment or development opportunity coming to the market. The recent bidding on Melbourn Science Park and Cambridge Science Park reflects the demands from investors to buy into the life sciences market.

Richard agrees: “The level of interest received from developers and investors during 2020 has been significant.  Oxford is a really difficult place to find opportunities though because land holding is tied up by Colleges who are not in the business of selling plots.” 

Another striking difference between the two markets is the industrial sector where Oxford recorded its best ever year for take-up at 1.26 million sq ft in comparison with just 200,000 sq ft in Cambridge (although comparison depends somewhat on where you draw the boundaries).  Oxford benefits from good infrastructure connections with access to the M40 and M4 and in the last 2-3 years has seen significant development in the logistics shed market which has benefited from the explosion of on-line retailing.  

Both markets though have seen the development of a new mid-tech or techbox style unit which is being favoured by certain elements of the science and technology community who are looking for a high office content research and development facility which gives them flexibility fit out in the workshop area.  Rental growth has been particularly strong in these areas where occupiers are prepared to pay a higher price but expect a high quality product with minimum 20% office content.  

Richard says: “We expect further growth in this area to accommodate other sectors of the science and technology market including autonomous vehicles, space, fusion and cryogenics which are very strong in the Oxford area.”

Cheffins and VSL, who recently joined PAI,  will continue to work together to compare their markets and advise their clients who often have assets in both areas but need careful guidance on the subtle differences between the two markets. 

Richard concludes: “I think Oxford will see continued rapid growth in the coming years including larger occupier requirements which have become standard in the Cambridge market.”

Philip also sees the advent of the East-West Rail Link and the growth of the Oxford Cambridge Arc as being important. “We have existed as two separate locations for many years but growth in life sciences and other sectors especially during the pandemic has required greater collaboration which will continue in the future.”  

To receive a copy of the VSL report please email enquiries@vslandp.com and the Cheffins market report can be accessed here.