2. 2
Cambridge is unquestionably the UK’s
pre-eminent location for research and
development in high value industries such
as pharmaceuticals, biotechnology and
advanced engineering in software
and electronics.
The catalyst for the city’s success has
been the University of Cambridge which,
for many years, has ranked consistently
among the top universities in the world.*
Cambridge has one of the best educated
and most highly qualified workforces
in the UK, with 61.3% of its resident
population holding NVQ4+ qualifications,
against a national average of 36%.**
Such a highly skilled workforce provides
an attractive talent pool for major
domestic and international occupiers.
Fuelling the continued demand for high
quality office space, this activity also
helps to drive the city’s residential, retail
and leisure property markets.
The city’s accessibility and transport links
have also been instrumental in its success.
WELCOME TO OUR 2016 CAMBRIDGE COMMERCIAL EDGE
REPORT WHICH PROVIDES EVIDENCE BASED ANALYSIS
OF THE CITY’S OFFICE, LABORATORY AND INVESTMENT
MARKET OVER THE PREVIOUS YEAR AND OUR FORECASTS
FOR THE YEAR AHEAD.
Cambridge is just 50 minutes by train from
London and has excellent road connections
to the Capital and the wider region via the
M11 and A14. The Cambridge North railway
station, opening spring/summer 2017, will
link to the Cambridgeshire Guided Busway.
Tourism plays a major role in the city’s
economy. Cambridge has ranked in the
top ten most visited cities in Britain for the
last fifteen years, attracting over 400,000
international staying visitors in 2014***.
However, the total number of annual
visitors to the city usually exceeds
three million.
Economic growth forecasts from Experian
suggest that Cambridge will outperform
the wider East of England region and
the rest of the UK over the next few
years, driven mainly by its advanced
technology industries.
1,120,277 sq ft
another strong year for
take-up in 2015
195,000 sq ft
the largest leasing deal
in 2015
895,560 sq ft
of available office and
laboratory space, a 10%
decrease on 2014
£37.00 per sq ft
quoting for prime Zone 1
office space by the end
of 2016
£31.50 per sq ft
quoting rents for
business and science
parks by the end of 2016
7,469 sq ft
average deal size in 2015
*2015/16 QS World University Rankings, Cambridge University
was ranked 3rd
**NOMIS
***International Passenger Survey
3. carterjonas.co.uk 3
COTON
M11
J12
J12
J14
A10
A11
A1307
A1303
A10
A14
B1049
A603
A1309
A603
M11
A1303
A428
A14
CHERRY HINTON
MADINGLEY
GIRTON
HISTON
MILTON
FEN DITTON
ZONE 1
ZONE 2
ZONE 3
ZONE 4
ZONE 5
A CB1
B Cambridge Science Park
C Cambridge Business Park
D St John’s Innovation Park
E Biomedical Campus
F Cambridge Research Park
G Vision Park
H Capital Park
I Granta Park
J Chesterford Research Park
K Babraham Research Campus
L Cambourne Business Park
M Peterhouse Technology Park
N West Cambridge Site
O Haverhill Research Park
P Hinxton Trust
ZONE KEY
1
2
3
4
5
The prime
central area
The peripheral city
centre zone
The northern
fringe
The wider area
business parks
Peripheral locations
A
E
G
J
I
P
O
H
F
K
M
N
L
DB
C
ZONES
4. 4
The Cambridge office and lab market
enjoyed another strong year in 2015, with
take-up easily exceeding 1 million sq ft
– surpassing the 956,000 sq ft achieved
in 2014*. Manchester is typically the only
UK city outside London to record annual
take-up of over 1 million sq ft, so this is a
significant milestone for Cambridge.
This year’s figure was boosted by a
number of large deals involving major
companies in the life sciences sector. The
UK life sciences hub Granta Park is seeing
a buoyant level of activity, where work
has started on Illumina’s new 155,000 sq
ft facility which will open in summer 2017,
while Gilead has also announced a new
93,000 sq ft building. ARM has taken
195,000 sq ft of space at Peterhouse
Technology Park in what was the city’s
largest letting of 2015.
Notwithstanding these three “superdeals”
(over 75,000 sq ft to a single occupier),
take-up amounted to a very healthy 1.12
million sq ft.
OFFICE &
LABORATORY
The tone of the market is positive, with
momentum starting to build. However,
occupiers will have to face the reality that
there will be a limited choice of good
quality buildings across the city.
AVAILABILITY
The overall availability of built and under
construction office and lab stock stood
at 895,560 sq ft at the end of 2015, lower
than 2014 with a high proportion of this
space being relatively poor quality.
Over half of all available space (56%) was
in the outer business parks and wider
area (Zone 4), where some 50 buildings
were available, of which 33 were in the
sub-10,000 sq ft category. Indeed, there
is a distinct shortage of larger floorplates
across the city as a whole, notably those
over 20,000 sq ft which can house a
single tenant. Only nine such buildings
were available as at December 2015,
eight of which are located in Zone 4.
*our take-up figures include both offices and laboratories within Zones 1-4.
5. carterjonas.co.uk 5
Figure 1
Cambridge Office and Lab Take-up
Figure 2
Cambridge Office and Lab Take-up by Zones 2015 (sq ft)
The largest built single units available
at the year-end were the Emmanuel
Building, Chesterford Research Park and
Building 2010, Cambourne Business Park,
offering 41,850 sq ft and 31,214 sq ft of
space respectively.
The highest profile new building is
Brookgate’s One The Square, due to
complete in November 2016, part of
the CB1 mixed use development. The
building offers almost 137,000 sq ft of
office space, of which around 57,000 sq ft
exchanged at the end of October 2015.
Good quality space is generally taken
up quickly, whereas poor quality
accommodation typically struggles. As
such occupiers have limited choices and
tend to consider better space in locations
further afield in the outer zones.
THE TONE OF THE MARKET IS POSITIVE, WITH
MOMENTUM STARTING TO BUILD
THE CAMBRIDGE OFFICE AND LABORATORY
MARKET ENJOYED ANOTHER STRONG YEAR
IN 2015, WITH TAKE-UP EASILY EXCEEDING 1
MILLION SQ FT
2012
2013
2014
2015
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Zone 1
Zone 2
Zone 3
Zone 4
14.5%
67.9%
8.8%
8.8%
sq ft
Year
6. 6
DEVELOPMENT PIPELINE
Office and lab developments with outline
planning consent totalled almost 3.8
million sq ft at the end of 2015, a rise of
35% on 2014. Of this, around 1.3 million
sq ft will be delivered in Zone 4, while
three substantial schemes totalling
980,000 sq ft are at the planning stage in
Zone 2. It is worth noting, however, that
a number of significant deals in recent
years have emerged where the space was
not understood to be in the pipeline. For
example, Cambridge Assessment in 2014
and ARM in 2015.
Cambridge Science Park will see two new
additions in Q4 2016, namely 75,000 sq
ft at 26-27 Cambridge Science Park and
40,000 sq ft at 184 Cambridge Science
Park (The Sir John Bradfield Centre).
As of mid February 2016 an application
to provide a new Grade A office building
(The Maurice Wilkes building) of 62,410
sq ft on St John’s Innovation Park is close
to being submitted.
Caption??
At CB1, Brookgate are seeking forward
funding for 50 and 60 Station Road, which
will deliver 134,000 sq ft of Grade A office
accommodation with ground floor retail. If
secured before June 2016 there is potential
for delivery in Q4 2018.
Only a handful of schemes have a definitive
completion date and 2016 will see a lack of
new built buildings available to the market.
As a result, occupiers’ choice of space will
remain limited in the short term.
TAKE-UP
Take up for 2015 reached 1.12 million sq ft
which, compared with a stock level of c. 10
million sq ft, is an impressive achievement.
The majority of deals recorded were in
the sub-10,000 sq ft category. Zone 4 was
responsible for the three ‘superdeals’ and
therefore outperformed all other Zones.
Q1 of 2015 had a strong start with take up
totalling 344,000 sq ft, a 45% increase on
Q1 2014. Q3 2015 recorded the most activity
achieving 460,000 sq ft.
7. carterjonas.co.uk 7
600,000
400,000
200,000
-
RENTS
A combination of sustained occupier
demand and limited supply is putting
rents under pressure and further steady
growth is anticipated for 2016. Following
on from rents of £34.50 per sq ft being
achieved in Q4 2015 in Zone 1, quoting
rents are currently £36.50 per sq ft in
that zone.
Typically, Zone 3 produces the highest
achieved rents outside Zone 1 within the
northern fringe business and science
parks, which currently stand at £30.00
per sq ft. Rents in Zones 2, 4 and 5 are
generally lower than in Zone 1, with
typical rents of £21-25.00 per sq ft.
With strong occupier demand, the
market remains in favour of the landlord,
resulting in lease terms tightening.
Tenant concessions of rent free and
capital contributions have fallen from
previous years.
WITH STRONG OCCUPIER DEMAND, THE MARKET REMAINS IN FAVOUR OF THE
LANDLORD, RESULTING IN LEASE TERMS TIGHTENING
Figure 4
Prime Achieved Cambridge Office and Laboratory Rental Levels
(2006-2016, split by City Centre and Business Parks)
Figure 3
2014/15 Take-up by Quarters
Number of Transactions by Zone
Number of Transactions by Quarter
40
35
30
25
20
15
10
5
0
2006 2007
£persqft
2008 2009 2010 2011 2012 2013 2014 2015 2016
Zone 0 - 9,999 10,000 - 19,999 20,000 - 49,999 50,000 + Sq Ft
Zone 1 15 1 3 0 162,049
Zone 2 33 2 0 0 98,712
Zone 3 10 2 1 0 99,002
Zone 4 67 4 3 4 780,514
Total 130 9 7 4 1,120,277
Quarter 0 - 9,999 10,000 - 19,999 20,000 - 49,999 50,000 + Sq Ft
Quarter 1 43 2 3 1 344,034
Quarter 2 43 1 1 1 177,736
Quarter 3 28 4 2 2 461,841
Quarter 4 16 2 1 0 136,666
Total 130 9 7 4 1,120,277
Q1 Q2 Q3 Q4
sq ft
2014
2015
City Centre
Business Parks
Forecasts based on
best achieved rents
Source: Carter Jonas
8. 8
Headline rents in Norwich have improved
over the last five years rising from £14.50
per sq ft to £16.50 per sq ft, although
Peterborough, Ipswich and Colchester
have remained relatively stable.
Demand for office space in Norwich
continues to rise, with the city seeing
above average annual take-up figures
for 2015 (by comparison to the five
year average). Peterborough has seen
the lowest annual take-up of space
in comparison with the other major
towns and cities in the region and
also compared to its own five-year
average. Although it is evident that the
office market in Norwich is improving,
it is known that at least two offices
(extending to around 45,000 sq ft in
total) have been acquired for conversion
into residential accommodation, including
22,900 sq ft of Imperial House purchased
for this purpose. Ipswich has seen similar
trends, with 67,000 sq ft at St Edmunds
House taken by Crown House Homes for
conversion into apartments.
FOCUS
ALL OF THE MAJOR TOWNS AND
CITIES IN THE REGION HAVE SEEN A
FALL IN THE AMOUNT OF AVAILABLE
SPACE IN THE MARKET, WITH
IPSWICH SEEING THE GREATEST
FALL BY COMPARISON TO THE 5
YEAR AVERAGE.
Description 2015 5 Year Average
Headline Rents £16.50 per sq ft £15.50 per sq ft
Stock 5,296,217 sq ft 5,248,306 sq ft
Available Sq ft 430,008 sq ft 446,975 sq ft
Annual Take-up 107,559 sq ft 97,486 sq ft
Description 2015 5 Year Average
Headline Rents £14.00 per sq ft £14.00 per sq ft
Stock 5,121,585 sq ft 5,044,464 sq ft
Available Sq ft 612,288 sq ft 654,749 sq ft
Annual Take-up 43,475 sq ft 121,677 sq ft
Description 2015 5 Year Average
Headline Rents £14.50 per sq ft £14.50 per sq ft
Stock 5,555,496 sq ft 5,608,537 sq ft
Available Sq ft 454,602 sq ft 603,752 sq ft
Annual Take-up 46,451 sq ft 74,655 sq ft
Description 2015 5 Year Average
Headline Rents £15.00 per sq ft £15.00 per sq ft
Stock 2,815,447 sq ft 2,830,284 sq ft
Available Sq ft 207,782 sq ft 281,777 sq ft
Annual Take-up 49,966 sq ft 57,815 sq ft
NORWICH
PETERBOROUGH
IPSWICH
COLCHESTER
9. carterjonas.co.uk 9
Following a very active 2014
which focused on business parks,
Cambridge’s office investment
market had a quieter 2015, with
investors turning their attentions
more towards the retail and
leisure sectors – reflecting
the attractiveness of the city
across the broader property
spectrum. However, while there
is significant investor interest,
standing investments rarely come
available and forward funding and
refurbishment opportunities are
more likely in the current market.
The largest investment transaction
of the year was L&G’s and
Wrenbridge’s acquisition of the
Grafton Centre for £99 million,
followed by Singapore-based
CDL Hospitality Trust’s purchase
of the Cambridge City Hotel for
£61.5 million. Frasers Hospitality
INVESTMENT
Address Sector Price (m) Net Initial Yield
(%)
Purchaser
Grafton centre Leisure 99.0 5.25 Legal & General UK PIF II
& Wrenbridge
Cambridge City Hotel Hotel 61.5 5.60 CDL Hospitality Trust
Tesco, Newmarket Road Retail 44.5 4.75 Orchard Street IM
Kett House, Station Road Office 20.35 4.70 Kames Capital
Cambridge Research Park Business Park 10.44 6.14 PITCH
Hotel du Vin, Trumpington Street Hotel n/a n/a Frasers Hospitality
EVEN WITH
PRIME OFFICE
YIELDS
STANDING
AT SUB 5%
CAMBRIDGE
STILL OFFERS
A SIGNIFICANT
PREMIUM OVER
CENTRAL
LONDON
also acquired the Hotel du Vin
on Trumpington Street as part
of a larger Malmaison/Hotel du
Vin portfolio from KSL Capital
Partners for £363 million. Orchard
Street IM followed their forward
funding of One Station square in
2014 with the acquisition of
Tesco on Newmarket Road for
£44.5 million.
In the office sector, the most
significant deal was Kames
Capital’s £20.35 million acquisition
of Kett House on Station Road
(Zone 1), at a reported yield
of 4.7%.
Even with prime office yields
standing at sub-5% Cambridge still
offers a significant premium over
Central London. Prime yields for
science parks meanwhile stand
at c. 6%.
10. 10
To those uninitiated in the ways of the
commercial property market, the prevalence
of cranes on the Cambridge skyline and of
hi-visibility workwear on its streets might
lead you to think the city has plenty of new
office space available to occupiers. But, in
fact, this year sees us midway through a
decade defined by the pre-let.
The feverish pre-let years of 2013, 2014 and
2015 are settling down as the properties
rise up out of the ground and occupiers
are either in residence or gearing up for
occupation in 2016 and 2017.
By the end of 2015 Deloitte, Thales and
Carter Jonas agreed pre-lets at One The
Square, totalling almost half of the 142,000
sq ft building ahead of its completion in
November 2016.
By spring/summer 2017, the new Cambridge
North railway station and transport
interchange should be operational with
planning permission having been secured
last summer. Sited opposite the Cambridge
Science Park and adjacent to the Cambridge
Business Park, the city’s second railway
station should enable further commercial
development.
Last year saw significant property deals announced
at Granta Park which is Cambridge’s high profile
life sciences hub. Following the acquisition of two
Cambridge companies specialising in genome
technology – Solexa and BlueGnome - US
pharmaceutical corporate Illumina Inc announced
its multi-million pound investment in a brand new,
purpose-built 155,000 sq ft laboratory and European
headquarters building – with a design which gives
scope for an additional 70,000 sq ft to be added.
Gilead Science Inc’s expansion of its presence at
Granta Park was announced soon after, in a deal
which will see it occupy a total of 93,000 sq ft.
In addition, Granta Park itself is set to expand its 120-
acre site with the granting of planning permission last
year of a masterplan which will provide c. 365,000
sq ft of new R&D space around landscaped grounds.
In its 25th anniversary year, ARM Holdings plc,
the world’s leading semiconductor intellectual
property company, announced the expansion and
reconfiguration of its headquarters at Peterhouse
Technology Park. The 195,000 sq ft pre-let, split across
two new buildings, required exceptional planning
permission as it stretched into Green Belt land.
Although not pre-let, AstraZeneca continues to
attract complementary presence at the Cambridge
Biomedical Campus. The University of Cambridge
will be making a formal planning application for a
£94 million science centre on an almost 4.5 acre site.
This will bring together their medical research units
which are currently spread across four locations. The
re-location of Papworth Hospital to a seven acre site
at the Campus moved forward last year, with a £140
million construction deal sealed with Skanska. The
new state-of-the-art hospital will open in 2017.
A MATURING MARKET
FOR PRE-LETS
12. 12
Cambridge has a cherished historic city
centre with tight boundaries, and an
international reputation as a science and
technology research and development
centre of excellence. It is within
commuting distance of London. That is
the complicated scenario Cambridge’s
two local authorities – Cambridge
City Council (‘City Council’) and South
Cambridgeshire District Council (‘South
Cambs DC’) - were faced with when
compiling their Local Plans. And it
still is, following the recommendation
by the Planning Inspectors that the
examination of the twin-track draft plans
be suspended last May.
The fact that each authority had decided
to collaborate in the production of
their respective local plans is to be
lauded. It was probably inevitable,
given the seamless way residents and
commercial interests view Cambridge
and its surrounding sub-region. However,
the inspectors remain to be convinced
about the robustness of both authorities’
strategic approach on a number of fronts
and have charged the City Council and
South Cambs DC to review and re-submit
their draft plans with modifications
addressing a number of concerns.
In re-submitting – expected to be spring
2016 – the City Council and South Cambs
DC will have to demonstrate that an
adequate assessment of the housing
needs of the two geographical areas has
been properly made, taking into account
the need for affordable and market
housing and ensuring that homes growth
matches the expected 44,000 new jobs in
the two authority areas between 2011
and 2031.
The re-submitted plans will also have to
convince the Inspectors that the value
of the Green Belt has been adequately
assessed in a way the original plans did not.
As the plans stood last year, the Green Belt
was, with one or two notable and small
exceptions, considered as an absolute
constraint, as opposed to a planning policy
tool that can be ‘flexed’ in pursuit of a
sustainable development strategy.
As with previous plans, the combined
authorities’ strategy mainly focused
development within committed sites on
the city boundaries and then ‘leapfrogged’
over the Green Belt to identify new sites in
necklace areas around the city in the South
Cambs district. It was felt by the inspectors,
however, that the supporting material
for this policy approach did not address
matters of transport infrastructure and its
funding in sufficient detail to warrant the
approach being taken.
Modifications to the plans were published
at the end of last year, with a consultation
period running in to the early part of this
year. The view of our commercial team is
that the authorities have not, materially,
changed their fundamental approach to
their strategy. However, if the planning
inspectors feel the case has been made
more robustly this time, then adoption of
the plans remains possible.
LOCAL PLANS FOR AN
INTERNATIONAL CITY
13. carterjonas.co.uk 13
These new local plans will look to the
future and so property professionals and
advisers are left to operate in the present
with already adopted local plans. The City
Council has a robust housing land supply
in excess of five years, which should serve
the city’s residential needs in the short
term. However, the South Cambridgeshire
area does not have an adequate,
allocated housing land supply and so
leaves itself open to developers being
able to justify applications for residential
development on a case-by-case basis, as
has happened in recent months.
Commercial development opportunities
look to a number of sites, including the
new town of Northstowe and, ultimately,
the future redevelopment of Waterbeach
barracks. Cambridge North Railway
station and transport interchange is
bringing forward the Northern Fringe
East as a viable new development frontier
for commercially led mixed-use. Given
its former use and location, scope for
residential and amenity use is limited,
although specific commercial use-class
profiles are yet to be fully determined.
The expansion of the existing West
Cambridge site should make it the prime
commercial and institutional research
hub proposed by the University of
Cambridge. This year sees an application
for permission for a new masterplan for
the site, which includes substantial new
development believed to be over
1 million sq ft.
Nearby, progress is being made at the
University’s North West Cambridge
150 hectare site. The scheme, which
has a strong emphasis on housing and
community amenities, includes a primary
school in its first phases. It is a mixed-site
development delivered in two distinct
parts that will, in its latter phases, offer
academic and research space, with a
significant element of commercial space
which will be delivered in collaboration
with the University.
At the Cambridge Biomedical Campus,
development land for commercial and
medical use is assigned to current and
future occupiers already, however,
the local authorities are, presently,
considering possible modification to the
plans to allow for expansion of the site.
There will have to be an intensification
of development on existing business
and science parks to meet identified
commercial needs. Many of the buildings
on the original parks are nearing the end
of their life span and so where parks are
landlocked, the only way to grow will be
to go up. Parks on the outer fringes may
well be looking to acquire land to extend.
Developers are looking currently to the
south of the city, towards Great Shelford
and the Junction 11/M11 interchange in
proposing at least one new science park.
Many believe there is the case to be made
for two new science parks on this south
side of the city.
THE EXPANSION
OF THE
EXISTING WEST
CAMBRIDGE SITE
SHOULD MAKE
IT THE PRIME
COMMERCIAL AND
INSTITUTIONAL
RESEARCH HUB
PROPOSED BY THE
UNIVERSITY OF
CAMBRIDGE
15. carterjonas.co.uk 15
FORECASTS
• Rents in Zone 1 and Zone 3 are becoming
more aligned. Zone 1 rents are expected
to increase from £34.50 to £37.00 per sq
ft in 2016, with rents in Zone 3 rising from
£30.00 to £31.50 per sq ft
• The refurbishment of second hand
space will continue as opportunities
come forward
• The supply of built office space will remain
constrained in 2016. As a result, more
firms will consider modern office practices
of agile working, digital document
management and hot desking
• Lack of available Grade A stock may
hinder market activity
• With a steep rise in rents in certain zones,
occupiers may look to relocate to less
expensive locations
• Landlords will benefit from increased rents
at rent reviews and lease renewals
