People think of Oxford and its dreaming spires. A seat of learning, where moustachioed dons pontificate on economic treatise, and socially awkward, but intellectually gifted, students aspire to Nobel Prizes. They think of its covered market, with venison sausages and hung pheasants. The Turf Tavern where bear baiting used to be allowed with permission from the Vice Chancellor. Even the preposterous Bullingdon Club, and the Morris dancers on May Day. Oxford in the popular imagination, is not a centre of economic innovation. If anything, it’s thought of as a little stuffy. A relic of olde England, a pastiche of privilege.
But beyond the tea towels, open decked tour buses, gowns and mortarboards, a dedicated group of innovators are reimagining the city. Oxford has long harboured ambitions of being a digital hub for the British economy and its efforts are beginning to bear fruit. The genesis of this is simple. Oxford has a history of innovation, science-based learning, and technology, so why not harness it to ensure, the city benefits from the talent it supports.
The first step on this journey was the creation of the Oxford Science Park which is now home to over seventy organizations. It has allowed the growth of major businesses such as Sophos, a pioneer in cyber security. It’s also supported Oxford Instruments, a research and manufacturing organization listed on the London Stock Exchange. These early pioneers are not only successful, but serve as inspiration for new start-ups.
Digital Oxford is an umbrella organization to facilitate interaction between digital, media and technology companies in the area. It increasingly serves as a collaborative forum to help entrepreneurs as they launch, grow and consolidate. Often, they draw on the incredible human capital which results from having one of the best universities in the world on the doorstep. Take Brainomix, a stroke imaging organization which uses artificial intelligence and deep learning algorithms to offer solutions in this complex scientific area. A cursory analysis of its staff reveal how its foundations lie firmly in Oxford. Its CEO, a former director of the preclinical stroke lab at the university, has built a world class team, many of whom have backgrounds in research and academia in the nearby area.
But it would be wrong to think Oxford’s commercial activities are a mere extension of the university. Passle is an expert-to-expert marketing platform, which is growing to be a new force in the industry. Its founders selected the city to be its headquarters, without a prior connection. It already counts major multinationals as clients, from Deloitte to Freshfields, Linklaters to EY. Labstep provides a further example of the kind of innovation for which Oxford’s digital economy is now becoming known. It enables the creation of a customizable research environment, for academia, but also for enterprise, industry, and institutions. It already partners with Massachusetts Institute of Technology, Lab Genius and Cambridge University, alongside nearly 900 educational bodies and over forty companies globally.
According to the think tank, Centre for Cities, Oxford had the third highest rate of patent applications per head of the population of any city in the UK.[Centre for Cities] It is also a hub for the creation of new businesses. Between 2008 and 2018, Oxford recorded a 15% increase in business start-ups, ranking it amongst the most dynamic metropolitan areas of the UK. None of this is surprising, given the city has a large and growing segment of industry which can be defined as knowledge intensive. What Oxford is managing to do, though, is retain some of the talent it fosters, through creating an environment supportive of career development.
Oxford has the highest percentage of 18-29 year olds of any city in the UK, at nearly 32%.[CFC] Of course, some of this owes to the universities, but there are cities in the UK with a much larger overall student body. It also has a high percentage of people aged between 30 and 44 which cannot be explained away as a consequence of its status as a university city. Rather, the economic opportunities in Oxford help retain talented graduates, both in traditional industries, but increasingly the digital economy. This explains why nearly 64% of Oxford residents have attained an educational level defined as competence involving the application of a broad range of complex, technical or professional work activities. It is also why Oxford has the highest employment rate of any city in the UK.
So what does this mean for the real estate market? Oxford has the worst housing affordability ratio of any city in the UK. This means average earnings, though high comparatively, don’t go far enough toward the average house price. You can attribute this, at least in part, to constrained supply. Oxford falls in the bottom ten cities of the UK for increases in the housing stock. Between 2008 and 2018, Oxford registered only a 4% increase, which does not compare favourably with its peers. Indeed, its historical rival, Cambridge, also a hub for technology, increased its housing stock by over 15% in the same period. This, combined with the recognition of Oxford as a desirable place to do business, is keeping house prices beyond the reach of what is achievable for the sort of graduates the city’s policy makers and leaders, wish to retain.
But just as Oxford has always provided incredible opportunities for those lucky enough to gain admission, the current housing situation, presents opportunities to investors. The first, perhaps obviously, is the rental market. Discounted new build stock, as a consequence of Brexit, and latterly, coronavirus, allow investors to buy into a prime market, with a strong pool of renters. In the short term, this offers competitive yields in a core UK market. If confidence returns, not only capital preservation, but appreciation, is probable. The second opening, increasingly understood by UK private equity, is strategic land and master planning. Oxford’s governing bodies understand more land will have to be made available for development if it is to remain competitive, and retain talent. Investors who select the correct developments in strategic locations servicing the city, may yet see some of the most attractive real estate plays in the 2020s.
So Oxford is both blessed and cursed. Its listed buildings, quadrangles, ecclesiastical splendour and picture postcard good looks, make it desirable, but constrain development. Its intellectual clout supports the venerable, outstanding and eccentric, but the cost of living, deter those very same risk takers, who chose business creation over salaried employment. But in uncertain times, shrewd investors gravitate to fundamentals. And with this dislocation, well resourced individuals may just find there has never been a better time to buy core properties at competitive prices.