Oxfordshire Commercial Edge 2018

OXFORDSHIRE 2018 COMMERCIAL EDGE OXFORDSHIRE

THE ECONOMIC SUCCESS FOCUS ON OF OXFORDSHIRE HAS BEEN INVESTMENT PRIMARILY DRIVEN BY THE KNOWLEDGE SECTOR. THIS IS REINFORCED BY THE FACT THAT THE EDUCATION SECTOR ACCOUNTS FOR OVER 7% OF THE COUNTY’S ECONOMIC OUTPUT. THIS HAS ND HELPED IN PRODUCING A GVA 2 PRODUCTIVITY FIGURE PER FASTEST GROWTH CITY RANKING WORKER THAT IS 17% ABOVE (UK 2018) THE NATIONAL AVERAGE. £71,641 The result of this is Oxford being ranked as 2nd in the GROSS VALUE Fastest Growth City Ranking and ranked first on the Good Growth for Cities Index. This growth is further ADDED (GVA) supported at a macro level by the Government’s PER WORKER Industrial Strategy and the commitment made in the (UK £61,444) Autumn Budget to invest £215 million in Oxfordshire on vital infrastructure projects. Long awaited plans to redevelop the central Oxford train station are 98.7% considered crucial to future prospects. SUPERFAST Oxford itself has witnessed above average BROADBAND economic growth over the last five years (3.4%pa average), with 2017 seeing economic growth of 2.7%. COVERAGE 2018 is expected to see reduced economic output at (England 95.2%) 2.2%, but this is still well above the national average. OX E F NG The strong economic growth has translated into O L R A particularly healthy employment growth. During 2017 D N

98.7 95.2 D employment growth was 2.0%, compared to 1.3% % % nationally. Employment growth is expected to slow down throughout 2018 after the sustained growth seen over the last five years, although the demand for almost 1,000 FTE jobs is anticipated in 2018. Consumer expenditure in Oxford grew by 2.0% 48.6% across 2017. Growth is forecast to be lower across BUSINESS 2018, at 1.3%, but still noticeably above the national SURVIVAL level. In fact, disposable income per head in Oxford is RATES 36% above the national average. (% after 5 years) (England 44%)

2 Figure 1 Oxford GVA

Source: Experian 6.0%

5.0%

4.0%

3.0%

2.0%

Property investment activity planned to happen within the county. 1.0% in Oxfordshire has generally The Oxfordshire Local Enterprise been static due to lack of stock, Partnership (LEP), for example, 2014 2015 2016 2017 2018 2019 2020 with approximately £190 million has been identified as the most of deals completed across 2017 successful LEP in attracting office compared to £307 million in occupiers, and Oxford is classed as 2016. These figures do however a Top 10 City by Nesta for inward THE OXFORDSHIRE LEP HAS exclude Hermes’ sale of a capital investment. The LEP has also BEEN IDENTIFIED AS THE 50% equity stake in MIlton Park achieved year-on-year growth over MOST SUCCESSFUL LEP IN for a reported £200 million the last five years in terms of foreign ATTRACTING OFFICE OCCUPIERS which falls outside of our direct investment successes. This has investment criteria. assisted in delivering over 40,000 Figure 2 Oxfordshire Commercial jobs in the county since 2011 – half Investment Volumes The industrial sector saw investment of the 2031 target. £ million Source: Property Data trading in excess of £70 million, A range of further actions are 400 driven primarily by four large deals being promoted by the LEP and in Banbury, Didcot and Faringdon. key local stakeholders to include 350 These were delivering yields of the agreement of a Local Industrial between 5.5-6.5%. Activity was Strategy, developing the Oxford- 300 focussed in the first half of the year. Cambridge Arc initiative, investing Retail investments totalled just and expanding the Science Vale and 250 over £30 million in 2017. This was Didcot Enterprise Zone, and rolling 200 driven by two deals in particular, out the Government-supported Waitrose in Banbury and Yarnton Oxfordshire Transformative 150 Nurseries in Kidlington. Yields Technologies initiative. remained tight on many transactions, Whilst this increase in activity over 100 at around 4.5%. the past few years has and continues 50 Interest in property investment to result in key gains, equally there across Oxfordshire has also driven by remains much to do in terms of local 0 the wider infrastructure investment investment in infrastructure and 2011 that has been happening and is housing particularly. 20082009 2010 2012 2013 2014 2015 2016 2017

carterjonas.co.uk 3 PROPERTY % % 5.2 81.3 3.7 57.8 13.9 NATIONAL NATIONAL NATIONAL NATIONAL NATIONAL NATIONAL £10,739 % % 1.2 82.5 OXFORD 1.3 1.4 49.8 OXFORD OXFORD OXFORD OXFORD OXFORD £11,839 LIFE EXPECTANCY (YEARS) LIFE EXPECTANCY SUPPLY/DEMAND RATIO (YRS SUPPLY) RATIO SUPPLY/DEMAND INDUSTRIAL SPEND PER SQ FT RETAIL GCSEs ACHIEVED 5+ A*-C - %, 1 YEAR+) (2016 UNEMPLOYED LONG-TERM SUPPLY/DEMAND RATIO (YRS SUPPLY) RATIO OFFICE SUPPLY/DEMAND % % % % 11.9 0.6 1.7 1.3 44.0 NATIONAL NATIONAL £18,793 NATIONAL NATIONAL NATIONAL NATIONAL % % % % 7.1 12.1 2.7 OXFORD OXFORD OXFORD OXFORD OXFORD 2.0 OXFORD 48.6 £25,646 OXFORDSHIRE RATIO HOUSE AFFORDABILITY EDUCATION GVA OUTPUT (% ECONOMY) GVA EDUCATION INCOME PER HEAD INCOME (% AFTER 5 YEARS) RATES SURVIVAL BUSINESS 2017 GROWTH EMPLOYMENT GVA 2017 GROWTH Three dimensions of a ‘balanced city’ are outlined below. Comparing Oxford’s performance performance Oxford’s Comparing below. outlined city’ are of a ‘balanced dimensions Three of the city. the affluence consider us to allows average the national to BALANCING THE STATS BALANCING ECONOMICS PROSPERITY COMMERCIAL EDGE COMMERCIAL COMMERCIAL EDGE OXFORDSHIRE

Office take-up in 2017 across OFFICE/LAB Oxfordshire totalled 586,000 MARKET sq ft, representing the highest recorded level over the past decade and a notable increase against the 2016 figures. Oxford’s knowledge-based economy has been the primary driver of this growth, with approximately 74% of the recorded transactions involving £30.00 companies operating in the life OXFORD OFFICE sciences and technology sectors. RENTS (psf) Q4 2017 Activity has been concentrated on the County’s three main science and technology hubs - Oxford Science OXFORDSHIRE Park, Milton Park and Harwell. OFFICE TAKE-UP Speculative development at these (2017) hubs will be delivering 206,500 sq example, had a much subdued share ft in Q1 2018. Much of this stock is of transactions due to shortage expected to be committed prior to of supply. Nevertheless, we have completion. continued to see an increase in rental OXFORDSHIRE This activity has not been tone generally within the County’s OFFICE SUPPLY widespread throughout the County, remaining stock, driven partly by lack (End 2017) however. Oxford City centre, for of supply but also through landlord investment. With no new additions to the Figure 3 Office & Lab Take-up Figure 4 Office Rental Levels, 2017 development pipeline in the past

Source: Carter Jonas Source: Carter Jonas Primary Secondary 12 months we anticipate greater sq ft £psf take-up of second-hand stock over 600k 35 the next 12-18 month period. In the short-term, further announcements 30 are expected regarding Oxford 500k North (formerly Northern Gateway) 25 and Oxpens, albeit the first phase 400k of this latter scheme is likely to be 20 residentially driven. 300k We have previously reported 15 that the Oxpens scheme in Oxford 200k City centre may act as a catalyst 10 for rental growth. However, with the rental tone for the prime schemes 100k 5 now having passed the £30.00 psf mark, to a large extent the re-basing 0 0 of the County’s prime rental tone has already taken place. 2010 2011 2012 2013 2014 2015 2016 2017 Didcot Oxford Thame Witney BanburyBicester Abingdon 5 INDUSTRIAL MARKET

£10.50 OXFORD INDUSTRIAL RENTS (psf) Q4 2017

OXFORDSHIRE INDUSTRIAL TAKE-UP (2017)

The Oxfordshire industrial build element is accounted for in OXFORDSHIRE market recorded take-up activity DB Symmetry’s larger Banbury and INDUSTRIAL SUPPLY totalling 1.42 million sq ft in Bicester schemes. Equally, however, (End 2017) 2017. This is approximately 5% there is a welcome return to small down on 2016 figures. These and mid-range development, such figures show a mixed occupier as at Link 9, Bicester and Foxcombe Figure 5 Industrial take-up by year profile, with no one sector Court, Abingdon. Source: Carter Jonas dominating. However, it does Rental tones have, on the whole, sq ft include a number of science continued to harden throughout the 1.5m based ‘industrial’ buildings, County with modest increases on such as the new Zephyr scheme most new build schemes. Capital at Harwell. Geographically, values have risen considerably. Link 1.2m although Banbury and Bicester 9’s latest transaction in Q4 2017, for account for the majority of example, is showing reported values of £128.00 psf. 0.9m transactional activity, the spread has been much wider than Excluding option activity, the previous years with notable future pipeline is largely unchanged 0.6m successes in Abingdon. with only Albion Land’s hard fought for Howes Lane scheme Availability has increased at Bicester being a new entry. 0.3m substantially to 1.84 million sq ft. Otherwise existing schemes supply This increase is partially driven by the is diminishing as take-up continues. new build schemes, which comprise The Howes Lane scheme totals 0 approximately 477,000 sq ft of the 51.2 acres and can accommodate total. A large proportion of this new- 570,000 sq ft of industrial stock. 2011 2012 2013 2014 2015 2016 2017 RETAIL MARKET

£300.00 OXFORD RETAIL RENTS (£psf ZA) Q4 2017 Oxford remains the dominant and convenience food outlets taking 49% force in the Oxfordshire retail the place of traditional high street INDEPENDENT landscape. The City is an retailers in this area. RETAILERS attractive retail centre with a Current Zone A rents remain strong historic, cultural and unchanged with Cornmarket at IND educational offering, attracting around £300psf (ITZA), Queen E P E over seven million visitors a year Street at £230psf and the top of the

49 D High Street at about £200psf. Lease

E and generating £780 million

R %

terms for the Westgate have been a R L worth of income. I E A

T closely guarded secret. However, we Our 2017 report focussed on the understand the Westgate is breaking Westgate Centre, including the with tradition, granting leases on +2.0% potential negative impacts it may terms as short as 5 years ensuring CONSUMER have on the remaining City retail occupiers will have to earn their EXPENDITURE 2017 scene. There have, indeed, been a place in the shopping centre or risk number of notable existing occupier their lease not being renewed. Rents moves to the Westgate, including are rumoured to be at an equivalent Next and River Island. However, £240 psf (ITZA). given the relatively strong level of Outside Oxford the expansion known occupier requirements and of Bicester Village, owned by Value limited unit availability, we consider Retail, has seen the addition of 30 it reasonable to assume that the new stores (total 160) to the scheme. THERE HAVE BEEN longer term prospects for the City Also on the approach to Bicester, A NUMBER OF remain strong. This view is backed up Consolidated Property Group have NOTABLE EXISTING by current footfall figures showing achieved outline planning for a new OCCUPIER MOVES a 11.9% increase in January 2018 retail park totalling 100,000 sq ft TO THE WESTGATE, to the equivalent week in 2017*. of prime retail space with the main INCLUDING NEXT It is evident from new arrivals in occupiers being Marks & Spencer AND RIVER ISLAND. Cornmarket that there will be a and with the scheme incorporating partial change in retailing focus with a new gym, restaurant and hotel. *Source: Oxford City council a number of tourist driven retailers Completion is targeted for late 2018.

carterjonas.co.uk 7 COMMERCIAL EDGE OXFORDSHIRE

PRIME RENT CHANGE FORECAST PRIME YIELD THE TRENDS (END 2017) OVER 2017 2018 (END 2017)

Office £30.00psf 5.5% OXFORD VALUES Industrial £10.50psf 5.5% Retail £300.00psf ZA 4.0%

CURRENT 2017 TAKE-UP CHANGE CHANGE AVAILABILITY (SQ FT) OVER 2017 OVER 2017 (SQ FT)

OXFORDSHIRE Office 586,000 843,300 BUSINESS SPACE ACTIVITY Industrial 1,420,000 1,840,000

SPOTLIGHT ON: UNIVERSITY SPIN-OUTS

Although the University spin out spin out companies accelerate their Strong demand from University is not a new phenomenon, the development programmes with the backed spin outs is forecast to past three years in particular benefit of this capital and expertise continue well into 2018/19 and have seen a marked increase and move into both conventional and translate into take-up in the in spin out investment, with a lab accommodation. Oxfordshire office market. The range of investment vehicles Since formation OSI has invested related challenges arising for concentrating on this sector, in over 45 spin out companies across landlords is their ability and capacity including Lansdowne Partners the technology and life science to deliver high specification office and Woodford Investors, sectors. Most recently Diff Blue, an accommodation, capable of fit out for amongst others. AI company, with a 2017 $22M Series dry and wet labs for companies rich A funding from Goldman Sachs, OSI in funding but with unproven trading The most high profile of these and The Oxford Technology and and unknown future property needs. however is Oxford Sciences Innovations Fund, has leased 15,000 Oxfordshire boasts a wealth of Innovation (OSI), launched in 2015 sq ft of city centre accommodation. established success stories within the in partnership with Oxford University In 2017, The Oxford Science Park spin out sector, with the examples to provide capital and scaling attracted EvOx Therapeutics to of Oxford Nanopore, Adaptimune, expertise to businesses driven by the Park, whose mission statement Immunotec and Immunocore alone intellectual property developed in is to create novel exosome-based accounting for 240,000 sq ft of Oxford’s Mathematical, Physical, biotherapeutics for the treatment of take up in 2017. It will be interesting Life Sciences and Medical Sciences various severe diseases. EvOx was to follow the newest crop of Divisions. one of three biotech companies that companies whose rise, or fall, could This in turn is now resulting in secured a combined total of £37m come about quicker given this tangible take-up activity as the from OSI in one round of fund raising. increase in funding activity.

8 FORECASTS Despite the uncertainty surrounding the impact of Brexit, in general terms Oxfordshire’s immediate future appears strong. This is primarily linked to the rapid growth in knowledge based industries but also the related prospects presented by Oxford spin out companies.

In the industrial market, limited stock and demand for new built stock will encourage further development, where opportunities allow. In turn, this will be bolstered by the improvement seen in rental and capital values.

In the retail market we will see a number of schemes progressed during 2018 in the wider market place, whilst in Oxford city centre we expect a period of transition as those moving to the Westgate do so and new entrants take their place. Whilst there may be some initial pressure on rental tones equally there is an argument for longer term improvements as the City’s footfall increases.

In summary, we have reason to be optimistic for the County’s prospects over the next 12 months.

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Carter Jonas LLP is a leading UK property consultancy working Catherine Penman Head of Research across commercial property, residential sales and lettings, rural, 01604 608203 | [email protected] planning, development and national infrastructure. Supported by a national network of 38 offices and 700 property professionals, Scott Harkness Head of Commercial our commercial team is renowned for their quality of service, 020 7518 3236 | [email protected] expertise and the simply better advice they offer their clients. Jon Silversides Head of Oxford Agency Find out more at carterjonas.co.uk/commercial 01865 404458 | [email protected]

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Building Consultancy Planning To view the data sources of the Commercial Edge research series, please Compulsory Purchase Property Management visit carterjonas.co.uk/CommercialEdge © Carter Jonas 2018. The information given in this publication is believed Consultancy & Strategy Research to be correct at the time of going to press. We do not however accept any Development Consultancy Valuations liability for any decisions taken following this publication. We recommend that professional advice is taken.