It’s not just the residential markets in Oxford and Cambridge that compete. Competition between both cities’ office markets is rife and the race is on to attract and retain the best high-tech tenants.
On paper the two cities are similar. A population of around 110,000; an hour’s train ride from London; a thriving tech scene; and world-renowned universities. All of which are driving thriving real estate markets.
The two cities are both experiencing an increase in office and R&D take-up, but if you look closer, Oxford’s total take-up, despite reaching an all-time high last year, is just three-quarters that of Cambridge. Cambridge’s office take-up, meanwhile, is double what it was 10 years ago.
Large movements in Oxford tend to be relocations of existing companies within the county. Despite all its qualities, the city is yet to pull in the same kind of international occupier interest as its rival which in the last year has seen AstraZeneca, Apple and Spotify all take space.
Commercial rents have also increased in both cities. Oxford’s rents have seen double-digit growth over the past five years, but at £26 per sq ft last year they are still trading at a discount to Cambridge’s headline rent of £35 per sq ft.
Both Oxford and Cambridge are forecast to see office returns outstrip the rest of the UK and a lack of supply will help keep that growing, especially into the science and business parks which contain most of the available space.
Meanwhile both cities will face the same challenges. At present take-up rates, neither has supply to last much longer than a year. Regarding future development, both cities are constrained by historic centres in the core and the green belt around the edges. Therefore commercial developers compete with higher value housing developers for land.
While Cambridge seems to be pulling ahead of its old rival – particularly through a flurry of international lettings – the supply squeeze in both may shake up the fringe markets, which could allow Oxford to catch up.