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Cities of the future
Cambridge’s renowned science and technology hubs are helping the city flourish from the rise of the knowledge-based economy, says Chris Urwin
As more jobs become automated in a digital, interconnected world, real estate investment decisions will be increasingly driven by the sustainability of city’s 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
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.12 Explaining 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.
1 ‘Agiletown: The relentless march of technology and London’s response’, Deloitte, November 2014
8 ‘Google buys UK artificial intelligence start-up’, Financial Times, January 2014
Unless stated otherwise, any sources and opinions expressed are those of Aviva Investors Global Services Limited (Aviva Investors) as at August 3, 2017. This commentary is not an investment recommendation and should not be viewed as such. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Past performance is not a guide to future returns. 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.