Whilst early days, already in 2022 Savills has recorded c. £40m worth of transactions. Looking ahead, the firm is aware of more than £200m of assets being prepared for sale.

Jonothan Holmes, director in the investment team at Savills, comments: “Prime yields for Oxford are now closing in on 4%, which is on par with Cambridge, and a 75 basis point premium to the prime regional office yield of 4.75%. Given the strong occupier market fundamentals and future rental growth prospects we expect investor interest to continue to increase over the coming year.”

From an occupational perspective, 2021 was a good year for Oxford, recovering significantly from the 2020 lull. Given the city’s growing reputation as a global science centre, biosciences accounted for 52% of the total take-up last year. Looking ahead, Savills anticipates take-up to be as much as 15% higher in 2022, driven by more buoyant occupier demand.

Savills estimates that there is as much as 2 million sq ft of requirements from companies looking to locate to Oxford. This is likely to lead to a much higher degree of pre-let activity as development ramps up. This has already been seen at schemes such as Thomas White Oxford’s Oxford North. At present, there is up to 1.9 million sq ft of office and laboratory space in the pipeline due to be delivered in the next three years (2023-2025).

Given the time lag when it comes to the delivery of this new stock, supply of office and laboratory space remains tight. This is likely to see office rents exceed £50 per sq ft in 2022, an increase of 4% on 2021. Out-of-town lab rents currently stand at £47.50 per sq ft, but Savills expect these to rise above city centre office rents over time, which is something that has already been seen in the Cambridge market.

Charlie Rowton-Lee, director in the business space team at Savills Oxford, adds: “There is a significant amount of financial capital being raised by companies created in Oxford. Nearly £750m was raised by spin-out’s from the university last year, up from £500m in 2020. This level of fundraising ultimately underwrites future occupational demand. Given that we are already seeing requirements hit unprecedented levels, development of further office and lab space is absolutely essential to the success of the city as a science and innovation centre. Given the well-known building constraints within Oxford, we are starting to see the conversion of retail assets to help satisfy some of this demand.”