Rents for prime space rise but overall demand declines for Oxford office and lab space

North Bailey House, Oxford

There has been a drop off in demand after the heightened activity seen in the immediate aftermath of the pandemic, however. Total demand reduced to 414,000 sq. ft in 2023 from 505,000 sq. ft in 2022, though take up has continued to match the long-term average in Oxford.

Prime rents for lab space increased to £76.50 per sq. ft in Oxford, as take up reached 211,000 sq. ft, down from 261,000 sq. ft in 2022, but still above trend for average activity levels. Yields for lab space moved out to 4.75%, reversing the tightening seen immediately after the pandemic, though Bidwells estimates that these rates could prove to be the peak in the current yield cycle if the Bank of England starts to reduce interest rates this year.

Rents for prime office space in Oxford reached a new high of £60 per sq. ft. A total of 204,000 sq. ft of space was leased in the office market, while yields moved out to 5.5%. Bidwells expect a fall in lab vacancy rates this year, following a temporary spike at the end of 2023 after new space was delivered to the market.

An overall decline in demand can be attributed to a reduction in Venture Capital funding for scale-up businesses, however, there remains a healthy pipeline of spinouts from the University of Oxford and requirements for units of less than 10,000 sq. ft have remained stable. Oxford University Innovation has recently announced its 2024 cohort of 24 new spinouts who have joined their incubator, therefore companies that in 12 – 18 months will be looking to acquire their own dedicated space as they grow and expand. This activity mirrors a wider trend in Venture Capital funding, where a slowdown in funding has been largely focused on the top end of the market. Fundings of £10-50m, on the other hand, saw their highest level since 2020 with a total of £432m raised in 18 funding rounds.

Robert Beatson, Partner, Head of Office and Laboratories Oxford at Bidwells, said:

“As long as Oxford continues to be a world leading centre of excellence for science and as the pace of medical innovation and drug discovery continues, commercial space in the city will attract significant, long-term occupier demand from participants in these industries. The city continued to see very strong demand for office and lab space in 2023, despite wider global macroeconomic issues and a top-end market decline in Venture Capital investment. Science and technology demand for prime space continues to capture increasingly high rental values as competition intensifies, while the strength of home-grown companies and an anticipated recovery in overall Venture Capital will stand the sector in excellent stead going into the future.”