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Oxbridge Life Sciences Values Prove Resilient, But Investment Volume Is Dropping

Cambridge lab space has 1.2M SF of demand.

The value of laboratories and offices in the Oxford-Cambridge arc has held up better than values in other sectors, a new report says, even as investment volumes dropped sharply due to the rise in interest rates. 

Prime office and lab yields in life sciences hot spots Oxford and Cambridge rose by 75 to 100 basis points in the 18 months to the end of June, data from Bidwells showed. That compares to a rise of 150 to 200 basis points on industrial assets in the same area. 

Cambridge labs have been one of the best-performing asset classes in the UK during the market downturn, Bidwells found. Strong rental growth meant capital values in the sector rose 17% in the 18-month period. Capital values for Oxford labs grew by 4%, with rental growth more muted. Oxford office capital values were flat, while Cambridge office capital values dropped 3%. 

Oxford-Cambridge arc lab investment transactions totaled £129M in the first half of the year, down from £549M in the same period last year, data from Bidwells showed. 

Cambridge lab takeup in the first half was 72K SF, close to the figure taken in the entirety of 2022. Prime lab rents are £68 per SF, up 3.8% on the same period the year before, and there is 1.2M SF of demand chasing space, up 164K SF over a year ago. 

Lab takeup in Oxford was 196K SF in the first half, while takeup amounted to 250K SF in the whole of 2022. There are 500K SF of requirements, and prime rents are £75 per SF, up 2.6% on last year. 

“Investors pursuing a value-add strategy in the arc should consider investing in Grade B offices in Oxford and Cambridge, which look unduly discounted given the strength of demand, the retail schemes in town centres with the potential for change of use, and development land which has dropped sharply in value, but should recover in the long-term,” Bidwells said in a report.