Oxford’s office market is suffering due to the demand for lab space in the city.
Guests at The Forum’s February 9 round table heard from Carter Jonas partner John Silversides who said core city centre office rents had more than doubled in recent years as stock has reduced and demand for labs has grown.
He said: “Investment into the lab market over the last 18-24 months has been to the detriment to the office market. What we’ve found in general terms is landlords effectively mothballing their stock, looking for that Golden Rubicon, this amazing thing in the distance.
“We do quite a bit of acquisition work but what we find is we are challenged to find stock now in most of our markets. On the horizon we’ve got this huge pipeline of labs coming through the planning system. At the last count it was something like 1.7m sq ft.”
Average office take-up he said, has been at around 270,000 sq ft a year in recent times but he added: “What we’ve seen is rents in the city centre have gone up from £25 per sq ft, to £60 per sq ft over a five year period.
“That is pure supply and demand. Lothbury have got a scheme under construction, the Clarendon Centre, of 200,000 sq ft where they’ve had massive competition all for one building because it is the only show in town.”
Discussion compared the Oxford market to Reading where talk in the marketplace suggests the first £50 per sq ft deal could be at One Station Hill, according to UK Property Forums managing director Matthew Battle.
He said occupiers such as Microsoft and EY are said to be interested.
But the meeting heard offices are entering a new phase due to ESG requirements. Nigel Horton Baker, chief executive of REDA, said: “In the office market there is some visible emptiness. One of the discussions at a workshop we held were around the fact that some of these buildings are ageing, so if they’re not BREEAM-plus, the occupier doesn’t want to know.
“It’s a critical factor. Does that mean that office buildings, just a few years old, are almost redundant? Perhaps part of the Oxford redevelopment in the city centre is part of that ‘out with the old, in with the new’ concept where everybody wants state-of-the-art modern offices.
“If you think of 2 Forbury Place, it’s perfectly state-of-the-art, it’s got to be desirable but it’s not shifting. SSE have got half of 1 Forbury Place and are still trying to relet space in that building – and we’ve got Station Hill coming through so there’s no shortage of supply.”
Another trend he pointed to was consolidation by occupiers which Reading had benefitted from. The town has also benefitted from the arrival of the Elizabeth Line, something he said investors, developers and financiers all point to.
Mr Horton-Baker added: “It’s that perception because it connects you to the City of London . The City of London is talking about Reading now in a way that they never did before.”
Philip Waddy, managing director of WWA, said, due to the Government net zero policy, a huge market in retrofitting is likely to emerge since 80 per cent of current buildings will still be around in 2050.
However, the potential retrofitting issue is not being addressed by Government, according to Mr Horton-Baker.
He said: “Low carbon skills and jobs and trying to define what green skills are is a big issue for the construction sector. The construction and development sector doesn’t really know what it’s doing, it’s not really getting the guidance from Government so, in terms of retro fitting buildings and/or building to low carbon standards, it’s not training its people to develop their skills.”
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