• Real Assets
  • Real Estate
  • UK Real Estate

Cambridge - a digital punt

9 August 2017

Cambridge’s renowned science and technology hubs are helping the city flourish from the rise of the knowledge-based economy, says Chris Urwin.

Important information

2 minute read

picture of Cambridge at dusk

Cities of the future

As more jobs become automated in a digital, interconnected world, real estate investment decisions will be increasingly driven by the sustainability of cities' labour markets.

Technology is reshaping commercial property demand, with Deloitte forecasting that 35 per cent of UK jobs are at high risk from automation over the next two decades.1 Lower-skilled roles are set to be particularly hit by this trend and markets that compete mainly on cost look particularly vulnerable to structural change. Knowledge-intensive, higher value-added occupations are less likely to be affected by automation.

The Cambridge office market is likely to be a beneficiary of this shift. The city’s population is expected to expand faster than the UK average in the five years to 2021.2 Reflecting the pull of its world-class education and scientific research facilities and culture, the city has a higher proportion of those aged 15-44 than the average for England and Wales.3

Cluster effect

Cambridge’s relatively deep, highly educated workforce has helped foster strong sciences and digital technology expertise, establishing the city as a leading European centre for research and development.

The 4,300 knowledge-intensive organisations registered within 25 miles of Cambridge, known as Silicon Fen, include diverse groupings of biotech, life sciences and technology-related organisations.5

The city has strong cluster effects, with local digital technology businesses supported by incubator and innovation spaces, strong knowledge sharing in local networks and a wealth of employable graduate talent. The 40,000 square foot Bradfield Centre in the Cambridge Science Park is one example of how the city’s universities are working with business to grow local technology businesses.6

Similarly, the opening of the Leverhulme Centre for the Future of Intelligence at Cambridge University highlights the institution’s growing reputation in artificial intelligence research.7

Amazon, Microsoft, Apple and Google are among the US technology giants attracted to Silicon Fen. Apple opened its research and development headquarters in Cambridge in 2016 while Google acquired Cambridge-based artificial-intelligence innovator DeepMind in January 2014.8 Meanwhile, Amazon is reportedly under offer to take space in the heart of the city as the company looks to add 400 research staff to develop capabilities such as machine learning and drone technologies.9

Following Softbank’s £24 billion acquisition of Arm Holdings in September 201610, the Japanese company pledged to double Arm’s UK headcount by 2021 and extend its headquarters at Peterhouse Technology Park in Cambridge.11 Vast sums of global capital are being invested in Cambridge due to the presence of innovative businesses and the availability of highly skilled talent.

Meanwhile, AstraZeneca is relocating around 1,500 staff to its new global headquarters and research and development facility in the city by 2018 to supplement its 2,000 workers already based in the vicinity.12Explaining the attractions of the city, AstraZeneca chief executive Pascal Soroit said the new Cambridge Biomedical Campus symbolised a desire to create a science-led company with close ties to a university that has “a global reputation for life sciences” in a place that “is a hub for biotech start-ups”.

Despite the potential impact of Brexit, Cambridge’s worldwide reputation and growing popularity as a hub for many leading multinationals highlight why the city is set to prosper from the boom in knowledge-based businesses. The local authorities and businesses are investing in the area’s transport infrastructure and housing stock so it can continue to compete with other global hubs like San Francisco and Boston as the local economy expands.

For these reasons, Cambridge offers more scope for durable rental growth than many other centres outside of London.

References

1  ‘Agiletown: The relentless march of technology and London’s response’, Deloitte, November 2014

2  PMA

3   2011 Census QA pack - Cambridge, Cambridge City Council

4   http://www.irwinmitchell.com/ukpowerhouse

5   Cambridge's Silicon Fen shaken by the winds of change, The Guardian, 23 July 2016

6   http://www.cambridgesciencepark.co.uk/community/amenities/bradfield-centre/

7   CFI launches on 19 October, with Stephen Hawking and Maggie Boden, Lverhulme Centre for the Future of Intelligence, 18 October 2016

8  ‘Google buys UK artificial intelligence start-up’, Financial Times, January 2014

9   Drone home: Amazon to triple R&D staff at Cambridge base, The Guardian, 05 May 2017

10  Completion of Acquisition of ARM by Softbank, Softbank Group, 05 September 2016

11   Kier chosen to develop £48m ARM headquarters expansion, Kier Group, 25 August 2016

12   AstraZeneca moving costs rise as new HQ nears completion, Reuters,  25 April 2017

Author

Related views

Important information

THIS IS A MARKETING COMMUNICATION

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe, this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK, this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: St Helens, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 1 Raffles Quay, #27-13 South Tower, Singapore 048583.

In Australia, this material is being circulated by way of an arrangement with Aviva Investors Pacific Pty Ltd (AIPPL) for distribution to wholesale investors only. Please note that AIPPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIPPL in respect of any matters arising from, or in connection with, this material. AIPPL, a company incorporated under the laws of Australia with Australian Business No. 87 153 200 278 and Australian Company No. 153 200 278, holds an Australian Financial Services License (AFSL 411458) issued by the Australian Securities and Investments Commission. Business address: Level 27, 101 Collins Street, Melbourne, VIC 3000, Australia.

The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom.

Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is based within the North American region of the global organization of affiliated asset management businesses operating under the Aviva Investors name. AIC is registered with the Ontario Securities Commission as a commodity trading manager, exempt market dealer, portfolio manager and investment fund manager. AIC is also registered as an exempt market dealer and portfolio manager in each province of Canada and may also be registered as an investment fund manager in certain other applicable provinces.

Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.