Demand for lab space in Oxfordshire is so strong it is driving up rents in the diminishing office market and even putting pressure on the county’s power supply.
Delegates at the UK Property Forums Oxford Social on November 17 also heard office rents in Oxford had doubled in the last five years and that the county is losing science occupiers who can’t find space they need to grow into.
The event, at the new Oxford Technology Park, designed to accommodate burgeoning demand for life science and technology space, heard from Adrian Chan, senior surveyor for Carter Jonas.
He told the meeting: “Throughout this year we have seen a lot of investors buying existing office buildings with a plan to convert these into labs.”
He said the effect was reducing supply, driving up rents. At the same time staff are returning to the office for two-three days a week and seeking quality space where they can collaborate.
Mr Chan said: “We’ve been hearing for years the office market is dead. Actually, it’s completely the opposite, especially in Oxfordshire.
“The office demand dynamic has just changed. It’s not dead, people are still coming back to the office but what businesses are looking for now is to be more efficient.”
He added: “Effectively, this year we’ve got about 60,000 sq ft on the market and I’m confident that all those buildings will be accounted for by the end of the year.
“So we’re going back to 2019 where we had no supply. This has also led to significant rises in office rents.”
Oxford Technology Park (OTP), a 400,000 sq ft partly completed scheme, is soaking up some of the demand laboratory space.
Bidwells partner Duncan May said: “We are seeing such high levels of demand, the question is, where’s the stock going to come from? People are scrabbling around and the beauty of this park is that it’s here and available now.
“Buildings that are finished are let, the ones being built are spoken for or under offer.”
Chairing the debate, UK Property Forums and Sandstone Law consultant Hugh Blaza asked if infrastructure was keeping up with demand from the science and technology sectors, prompting debate about power supply.
Mr May said: “Power is fundamental across the country. For electricity, it is dire out there. There is a requirement now in the Oxfordshire market for a 150,000 – 200,000 sq ft new facility from a very large company.
“They were going to take space in Bicester but they couldn’t provide the power to it by the time they had built it.
“It’s taking so long to get power to some of these places – it’s a fundamental issue. And with the new life sciences stampede that we’re getting around the county, if you take an office building, you need double the power to turn it into a lab building.”
Ian Harris, advisor to Life Science REIT, said that figure accounted for wet labs but for dry labs the power demand is double again.
Mr May said, in his 20 years in the industry rents in the city had gone up slightly in strong markets and down slightly in recessions but that began to change five years ago.
He went on: “In the last five years rents have doubled. I was doing deals in the city centre at £30 per sq ft five years ago.
“George (Brown, his Bidwells colleague) has got £58-plus per sq ft on newly refurbished space in the city centre.
“The AC Neilson building, four years ago, was £25 per sq ft. If you were building that now it would be £50. That’s an office building, not a lab building, so rents have doubled.”
He said fast growing science and technology firms could be lost to the county and even the country if they can’t find suitable space.
Mr Chan said that is already happening.
He added: “We are losing to America. There are businesses that have been sold and the majority are to American companies.
“Some of them have said ‘we’re shipping you to Boston’. It’s still happening because we don’t have the infrastructure, we don’t have the accommodation.
“In America, they are building 10 times what we are doing so it’s easier if they just go across.
“And we are not just losing business income streams, we are also losing the brains so we do have to work at this infrastructure to make sure we can deliver for businesses.”
Image shows speakers at the event (l-r): Hugh Blaza, David Bainbridge from Savills, Adrian Chan, Duncan May, Ian Harris and Matthew Battle from UK Property Forums.
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