“Knowledge is power”
is a quote most commonly attributed to Sir Francis Bacon but the principle is even more important in today’s economy
Strong demand for office and lab space in the ‘Golden Triangle’ outside of London continues to push up rents
The first half of 2017 has seen prime office and lab rents in Cambridge and Oxford surge ahead as the UK continues to refocus towards the ‘knowledge’ economy.
Prime office rents in Cambridge shifted up by 2.7% to £38 per sq ft in the first six months of this year, whilst Oxford saw a staggering rise of 7.1%, with rents growing to £30 per sq ft.
On the counter side, Central London office rents moved into reverse, with prime rents in the City of London down by 6.7% to £70 per sq ft in h1 2017, whilst West End rents are down by 12.5% to £105 per sq ft.
Local entrepreneurs launch new business accelerator initiative
Several local entrepreneurs have launched a new initiative to aid the growth of digital tech businesses in the region. TechVelocity Norwich has the aim of creating 10 new businesses with £20m turnover by 2019.
The ambitious target is the brainchild of Neil Garner and Kris Jones and will be based at WhiteSpace/Barclays Eagle Lab at St James Mill in Norwich.
Tight supply of grade A space maintains the pressure on secondary rental values
Unlike previous rental cycles in the ‘Golden Triangle’ the current upturn in rents has seen second hand office rents grow at a faster rate than prime rents as occupiers have been forced to consider older space given the shortage of newly developed stock.
The graph below illustrates the current cycle and places it in context with the last upturn in rents in 2007.
Over the latest cycle, which began as far back as 2012, prime rents have grown by an annualised 4.2% per annum, whilst good quality second hand space has seen growth of 6.6% per annum. The most surprising factor is that poorer quality office space has seen rents grow by 7.1% per annum over the past five years, as occupiers have targeted space in the absence of more modern stock.
Overseas investors continue to buy despite Brexit fears
The latest investment figures for investment into UK property have shown that overseas investors have continued their purchase of UK property, despite the economic and political uncertainty that has arisen after the Brexit vote.
In the first six months of this year, transactions totalling £24.2bn have been completed, slightly down on the same period in 2016 (£26.9bn) and almost 38% below the peak level of £38.8bn in 2015.
More than 50% of purchases over the first half of the year have been by overseas investors, illustrating a huge vote of confidence in the medium term prospects for the UK.
The recent purchase of a 50% stake in Milton Park, Abingdon by the Canada Pension Plan Investment Board is further evidence that the UK commercial property market remains attractive in the context of other investment options.