A record rent is about to be set in Cambridge’s labs market, as investors, developers and local authorities struggle to keep pace with demand from life sciences occupiers.
Germany’s BioNTech signed a deal with the government this month to test potential vaccines for cancer and other diseases in the UK. The company is now in talks to take around 40,000 sq ft of space at Prologis’s 1000 Discovery Drive at Cambridge Biomedical Campus (pictured), due to complete later this year.
The company is likely to pay between £60 and £65 per sq ft, setting a record for the city, up by roughly a third on the previous high of £48.50 achieved at Granta Park’s Portway Building.
Andrew Blevins, head of life sciences at Prologis UK, said the “numerous expressions of interest” for the building were “unsurprising” given how undersupplied the life sciences real estate market is.
The developer has near-term plans for a further 300,000 sq ft of space at the campus, while another 20 acres of land is expected to come to the market before the end of this year, which could deliver 1m sq ft of space.
Investors have been ploughing money into such developments, and investment in life sciences-related real estate across Oxford and Cambridge hit a record £1.65bn in 2022, according to data from Savills, driven by L&G’s sale of 194-198 Cambridge Science Park and Life Science REIT’s acquisition of Oxford Technology Park.
Savills said the pace of activity has continued into 2023, with £220m of assets already under offer in the two cities and a pipeline of speculative schemes set to add to supply.
Tom Mellows, head of UK science at Savills, said: “The severe supply shortage is being addressed by significant investment into future development sites, and we expect to see a number of our clients speculatively develop high-quality laboratory schemes within the next 12-24 months.”
Earlier this month, a draft report from the Greater Cambridge Local Plan estimated a need for around 6.5m sq ft of research and development space across the region over the next 20 years. But that figure could already look like an underestimate given that Bidwells had tracked active demand for more than 1m sq ft as of the end of 2022.
Indeed, agents say there is almost no available space. William Rooke, partner and head of Cambridge commercial agency and investment at Carter Jonas, said a dearth of available stock was making market analysis challenging and forecasting demand difficult.
“There are a few buildings coming on stream at the same sort of time,” he said. “That will really demonstrate whether that 1m sq ft requirement is viable or not.”
1000 Discovery Drive is the next site due to complete, followed by the delivery of new lab space at Granta Park, known as One Granta, in the second quarter of the next year.
Joanne Henderson, head of life sciences at CBRE, said: “The requirement really depends on what starts to happen and how the market evolves. We have a supply-demand imbalance at the moment, but when it starts to become a bit more stabilised, probably in about four years’ time when there will be much more product on the market, we will get a clearer view of what the requirement looks like.”
The Greater Cambridge Local Plan proposes to earmark sites in North East Cambridge and Cambridge East alongside the existing Cambridge Biomedical Campus plots as “priority sites for development”, with further work under way to analyse if green belt release is appropriate at the latter site as part of its fourth-phase development.
Emma Stratton, a partner in Cushman & Wakefield’s life sciences team, said: “It will be interesting to see what the population of Cambridge can support in terms of lab space. It is the number of people that it will require in terms of employment and whether they have got the critical mass of people or whether some of them will move to other urban centres such as London, Birmingham or Manchester.”
Stratton added that Cambridge’s ability to support the life sciences industry’s ambitions will also hinge on the region’s transport infrastructure and housing supply: “The delivery of new lab space could be restricted by other things.”
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