Oxford rents poised to surge as office and lab space dwindles

Oxford’s thriving science and technology sector is facing a potential hurdle: a critical shortage of office and laboratory space. According to a new report by property consultancy Vail Williams, this scarcity could send rents spiralling upwards in the coming year. The report paints a concerning picture. The city, it suggests, has just about enough Grade A office and lab space to meet demand from life sciences and biotech companies for the next year. This limited supply is a stark contrast to the high demand, particularly considering the strong take-up figures from last year, which saw around 420,000 square feet of lab space leased.

The consequences of this imbalance are already being felt. Rents for traditional office space have climbed from the early £30s per square foot to the mid-£60s range, with lab space commanding even higher prices, reaching up to £85 per square foot in some business parks. Watson warns that with the limited availability of premium space, rents could climb even further in 2024.

Fuelilng the demand is the robust life sciences sector, which accounted for roughly two-thirds of all office and lab space leased in Oxford last year. This growth is further bolstered by the steady stream of spin-out companies emerging from Oxford University. Watson expects this trend to continue, with a healthy pipeline of university spin-outs actively seeking sizeable office and lab spaces. This influx will likely put further strain on the already limited supply, driving vacancy rates even lower throughout the year.

However, there’s a potential silver lining for landlords with Grade B office space. The lack of Grade A options presents an opportunity for them to upgrade their properties and cater to the growing demand. Renovated Grade B spaces could potentially help alleviate the pressure on the premium market.

While the central Oxford area faces a dearth of readily available space, despite the recent completion of the 65,000 square foot Inventa lab and office building, the situation is slightly better in out-of-town business parks.

Overall, the outlook for Oxford’s property market, particularly the office and lab space segment, is one of excitement tinged with anticipation. While the limited supply presents challenges, it also signifies the city’s thriving science and technology sector. The coming months will reveal how the market adapts to this situation, with both landlords and tenants needing to navigate the evolving landscape.

The ongoing pressure on space in cities such as Oxford and Cambridge is explored in this feature.