Growth risk warning to Cambridge Science & Technology Cluster

DTRE, which last year bought into the Cambridge market via the acquisition of Juniper Real Estate, flags up some contrasting numbers in its new report on offices, Science & Technology in the Cluster.

Lab take-up reached 282,000 sq ft by the end of the year – the highest on record. And a prime lab rent was set in Q2 at £71 per sq ft on Babraham Research Campus.

But Grade A office take-up continued to be held back by a lack of readily available supply as vacancy fell to 2.9 per cent.

On the upside, Cambridge-anchored life sciences companies raised £720 million through VC funding and grants – 36 per cent ahead of the 2022 total and 13 per cent above the five-year average.

However, investment volumes were subdued, hitting £153m in 2023, although this was still 25 per cent ahead of the pre-COVID (2015-2019) five-year average.

Matt Smith, Head of Science and Technology Agency at DTRE, says: “Cambridge is attracting some of the world’s most innovative and exciting new businesses, with Cambridge-based biotech and life sciences companies alone raising £720m through venture capital and grants last year.

“However, the continued growth of the sector will be at risk unless we’re able to expedite delivery of new labs and science clusters to accommodate the sector’s early-stage innovators.”

Research analyst Florence Weston says in the report that shifts in working practices and other factors have continued to contribute towards negative investor sentiment surrounding offices, helping to hold back transactional volumes in 2023 with just £153m of deals completed across the office, science and technology sectors.

The need for more lab space in Cambridge is well documented but the situation regarding offices might surprise some. Of the total take-up, 46 per cent – 181,000 sg ft – was for Grade A space, headed by Samsung taking 33,600 sq ft at One Cambridge Square for 10 years at a headline rent of £38.50 per sq ft and Raspberry Pi taking an assignment of the 30,000 sq ft former CMR space at 194 Cambridge Science Park.

Weston said Grade A leasing activity remained restricted by a lack of high-quality up-and-built available space.

DTRE identified the trend of increased lettings occurring for smaller spaces. Across 67 deals, 82 per cent were for space from 0-10,000 sq ft, 12 per cent in the bracket of 10-20,000 sq ft, and six per cent occurred for space between 20-50,000 sq ft. There were no leasing deals over 50,000 sq ft in 2023.

Occupiers are taking smaller but high-quality spaces as they focus on the quality of the real estate to attract employees back to the office following the pandemic-enhanced work-from-home culture.

Despite these pressures on supply, the year ended with a significant amount of office space under offer – over 142,500 sq ft, of which 67 per cent is Grade A, reiterating the flight to quality narrative DTRE is hearing from occupiers.

2024 will see the completion of M&G and Wrenbridge’s 68,000 sq ft development, Brooklands, alongside the delivery of 10 Station Road which will provide 50,400 sq ft by the end of the year.

Demolition is underway at Railpen’s Botanic Place development that will see two office blocks built totalling 500,000 sq ft of workspace. DTRE expects demand for offices to increase through this year.