Aviva Investors has agreed an £87m forward funding agreement for a major office development at Brookgate’s CB1 scheme in Cambridge.
Aviva will acquire the site and fund construction of the 163,000 sq ft grade A office at 50 & 60 Station Road – the largest to be developed in Cambridge city centre.
The Grimshaw-designed scheme is expected to complete in early 2019.
The funding forms part of £434m secured so far at the CB1 project (see table, below).
The masterplan for the mixed-use scheme includes a public square, 625,000 sq ft of offices, an Accor Ibis hotel, a 3,000-space cycle park, student accommodation, restaurants, shops and a £4.5m railway station upgrade.
Aviva has also committed to a 192,000 sq ft future development pipeline at CB1, which it says will be built in response to occupational demand.
Saul Western, partner at Bidwells, said the deal showed the UK fund’s confidence in committing to speculative development following the EU referendum result.
Despite ongoing investor appetite, transactional volumes in the city have been low, with just £56m of deals in the past year.
Investment activity has largely been from UK funds, with the only major international deal being US REIT BioMed Realty Trust’s purchase of the 100-acre Granta Park from MEPC in 2012 for £133m.
Overseas investors, particularly from Asia, have shown interest in Cambridge but the city has been short of the large-scale investment opportunities many buyers from the Far East crave.
John Humberstone, partner at Orchard Street Investment Management, which has also invested in the broader CB1 scheme, called the city one of the strongest regional markets in the UK.
He said: “We remain keen and, notwithstanding the fact we have more than £350m invested, we would be happy to invest more if the right product was to come up.”
The city is already home to a growing cluster of international companies including Apple, AstraZeneca, Microsoft, Deloitte and Thales. There is 883,000 sq ft of development in the pipeline, and 90% of that is already committed.
Richard Baines, partner and head of UK at asset manager Rockspring, said the sites, which benefit from the Cambridge Enterprise Zone, showed the proactive nature of people who wanted to get business done.
Bidwells acted for Brookgate and will be retained agents, along with Savills, on the letting of 50 & 60 Station Road; BCM and Strutt & Parker advised Aviva Investors.
Aviva’s investment rationale
Andrew Appleyard, head of specialist real estate funds at Aviva Investors Real Estate, said the high barriers of entry, links to King’s Cross, N1, and the strong levels of occupational demand, attracted Aviva to Cambridge.
He said: “It is a city where there is good employment creation and growth prospects, particularly in biosciences and tech, which has been accentuated over the last five years or so – it is a type of occupier which is less affected by the Brexit scenario.
“Being a historic city, supply has been quite tight and Brookgate has managed to achieve success with placemaking in the city.
“We believe fundamentally in location and are looking at this as a strategic location.”
He added that the university had a global outlook and incubated a large number of start-ups which would be looking to expand.
“50 & 60 is going to be landmark for this location and following from that investment there will be further occupier interest. By agreeing with Brookgate to fund further development, we can plan the pipeline as we are looking to have a cluster ownership.”
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