Oxford faces a record level of 1.1 million sq ft of office space requirements going into the new decade.
Despite a challenging year from a wider economic and political front, the market saw take-up pick up towards the year end, comforted by greater certainty.
Completed lettings ended the year below the long-term trend, but the unmet demand bodes well for 2020.
The strength of demand persists, despite rising rents. Prime space in Oxford, if available, would let at a new high of £43.50 per sq ft, an upturn of almost a quarter during 2019, approaching the prevailing Cambridge prime rent. This is due to the uncompromising nature of this demand. Knowledge industry occupiers were responsible for 82% of take-up in in the Oxford market in 2019.
This marked shift in the balance of the Oxford economy over recent years is evident in the latest local economic data; the GVA in the district of West Oxfordshire is the highest across the Oxford–Cambridge Arc, and notably ahead of London. Our research shows that science and technology businesses were responsible for 60% of 2019 lettings, by floorspace. These sectors now occupy half Oxford’s science and business park floorspace[i].
These high performing knowledge intensive businesses want to be near like minds and the axis of research innovation. Our research 'Delivering R&D potential for the UK', undertaken in conjunction with You Gov (2018), underlines this point. The key priority for R&D companies is access to staff and available property; sensitivity to the cost of property occupation is relatively low.
The key is finding appropriate space in the right locations. New space remains at a premium with just 220,000 sq ft currently under development or refurbishment within the ring road, with much of this already committed. Heading into the new year, Oxford is faced with an availability rate of less than 7% with just 173,000 sq ft of Grade A space available to new or expanding businesses.
The latter is an important point, with the number of requirements for units of less than 5,000 sq ft at an historic high. Start-ups and second stage businesses are feeling the pinch as ‘bed-blocking’ by companies that have outgrown their incubator space, takes its toll on the opportunities for new start-ups in the Oxford ecosystem.
Oxford is also being particularly challenged at the larger end of the market. Half of requirements by size are for space of over 30,000 sq ft. While parks such as Harwell and Oxford Science Park are seeing new development coming forward, the pace of delivery is unlikely to keep up with demand. As a result, we again expect to see some of this demand spill over into the industrial sector.
To view Bidwells’ most recent business space research for Oxford please click here.
Image credit: Harwell Campus