COMMENT The popular view of offices is that they are condemned to suffer the same fate as shops, with high levels of vacancy and falling rents. Hybrid working will do to offices what online shopping did to the high street, as the narrative goes.
Yet figures for the Oxford office market tell a very different story. Lettings in the first half of 2024 were their strongest since 2018, the availability rate of 10.2% at the end of June was only slightly higher than at the end of 2020 and prime rents rose by a further 4% to £62.50 per square foot. So how is the Oxford office market defying the odds?
Office offsets
The main reason is that while some companies have cut their office space since the pandemic as they adjusted to hybrid working, this has been cancelled out by other companies expanding in Oxford and taking more space. Employment in office-based jobs in the city has grown strongly since 2020, with the result that the total amount of office space that is occupied has remained stable.
The chart compares the growth of office-based jobs in Oxford to the country as a whole between 2020 and 2022, the latest year for which official data is available. It reveals that employment in office-based jobs in Oxford grew by 14% between 2020 and 2022 – double the national average. Part of the growth was in life sciences and R&D which primarily use laboratories, although the growth of quantitative modelling and AI means that life sciences companies are also increasingly taking office space.
In addition, Oxford saw strong growth in jobs in tech and private sector administrative roles between 2020 and 2022. That more than offset a decline in financial and professional services.
The future growth of Oxford’s tech and life sciences cluster means that the demand for office space in the city is likely to grow, not shrink. Occupiers are currently looking for around 400,000 sq ft of office space in Oxford and surrounding areas. While some companies are still considering cutting their office space, a number are looking to grow, particularly those which are former spin-outs from the university and keen to stay in the city.
Shortage of space
A recent survey of science-based SMEs undertaken by Censuswide on behalf of Bidwells found that more than a third of companies wanted to be within walking distance or a short drive of their existing location, while 43% wanted a location in close proximity to an academic or research institution.
If we also factor in the lack of new office building in Oxford over the last few years, then we think it is more likely that the city will soon be facing a shortage of office space, rather than a glut. That, in turn, will drive up office rents and potentially encourage companies to relocate elsewhere, particularly companies who do not have links to the university, or research institutes. Indeed, the small fall in financial and professional services jobs since 2020 could be a sign that it is already happening.
Mark Callender is a research partner at Bidwells
Photo © Bidwells
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