Heading into 2022 the offices sector was already facing big questions around the likely permanence of home or hybrid working in many sectors and the nature of business recovery post Covid-19. Now, at the half way point of the year, other factors have been thrown into the mix too, with the war in Ukraine and inflation leading to further macroeconomic uncertainty.
But amid all the headlines about a 'tricky' 2022, how does sentiment currently stand among some of the key individuals that feed into making property decisions for their businesses: namely UK Chief Financial Officers (CFOs)?
Delving into the recent Deloitte survey of CFOs, which collated their sentiment at the end of the first quarter of the year, reveals a more nuanced and – dare we say it – optimistic outlook for the rest of 2022 than you may expect.
While the headwinds for CFOs have increased significantly during the past few months (a record number – 98 per cent – anticipate operating costs to rise in the year ahead) the vast majority also remain focused on their corporate strategy and growth, rather than just survival. 21 per cent say that capital spending remains a strong priority, considerably above the five-year average of 14 per cent, while a further 45 per cent say it is ‘somewhat’ of a priority.
Whether this capital expenditure takes the form of acquiring new premises, or extending or upgrading existing space, awaits to be seen in the short and medium term. But the fact that so many do anticipate investing in their property in some form, even against the current uncertain backdrop, is encouraging for the real estate industry.
While we can’t necessarily assign a motive to the CFOs who are planning such spend, one of the likely factors influencing their decision-making process is attracting talent. Again, turning to Deloitte’s findings, approximately one in four CFOs continue to anticipate significant or severe labour shortages in a year’s time. It’s hard to believe that they don’t see acquiring, or creating, exciting best- in-class space as a weapon in their arsenals to help win the talent battle and that competition for top quality offices across the UK won’t continue.
The big unknown is whether this sentiment will soften as the year goes on. With inflation continuing to grow into Q2 2022, hitting a 40-year high in the 12-months to May, it’s almost inevitable that CFOs in many sectors are going to face even more challenging conditions in the coming months, and the results are likely to reflect this.
However, given the resilience of the UK and previous patterns, it’s not impossible that there may not be a bounce in sentiment before the year is out. Either way, with most CFOs taking a long-term view towards property requirements, and many unable to delay decision making due to forthcoming lease breaks, we’re likely to see continued demand for UK offices.
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