Optimistic Outlook to Drive Demand for New Workspaces
As we enter a new decade, the UK commercial real estate market looks set for increased occupational demand.
3 minutes to read
Business sentiment surveys indicate that, for many organisations, 2020 is going to be defined as a year in which executives prioritise growth strategies, operational development plans take form, organisations expand their workforce and seek to attract the best talent and, in line with this, real estate strategies are activated.
One such survey is Deloitte’s UK CFO survey. The Q4 2019 results present an intriguing trend: after a year of pessimistic outlooks, Q4 marked a pivotal upsurge in sentiments and expectations for the future. 53% of the respondents reported that they were more optimistic about the financial prospects of their organisation than they had been a quarter prior – this metric’s biggest upturn in 12 years.
In line with CFOs’ renewed optimism, Deloitte’s Q4 survey also indicates that we could see a wave of organisations investing in their future: amongst positive results regarding capex and discretionary spending, 27% of respondents expect to increase hiring over the next 12 months, as opposed to just 3% in Q3.
This uplift, like the housing market’s ‘Boris Bounce’, has been attributed to the lessening uncertainty surrounding Brexit following December’s Conservative General Election victory. In April 2019, UK business investment was 20% lower than the Bank of England projected before the 2016 referendum, as executives held back strategic moves. However, following recent political events, the pressure that has built up is likely to be released as organisations begin to push forward with their expansion ambitions over the course of 2020.
Nevertheless, Brexit is not the only factor shaping sentiments. Current business trends are also likely to shape expansion ambitions and activate real estate strategies.
According to our own (Y)OUR SPACE research, 87.3% of corporate occupiers regard workspace as a ‘strategic device’, viewing their real estate as a means of attracting and retaining the best talent. Landlords appear to be responding to this, with 78% of London landlords claiming to factor workplace wellbeing into their commercial real estate refurbishments and development plans for the coming year, according to The London Report 2020. Demand for more employee-centric workspaces is paving the way for more deals for high-quality, amenity rich premises offering engaging and enriching working environments.
Businesses are also rethinking their premises’ suitability in relation to digital transformation plans. Mercer’s 2019 Global Talent Trends report claims 60% of companies plan to automate more of their operations. It appears that the promise of automated and intelligent processes, driven by Artificial Intelligence, Machine Learning technology and Big Data solutions, utilising 5G networks and the Internet of Things, is going to redefine how organisations carry out their business. Improved hiring sentiments may be partly reflective of organisations’ increased need for new staff with tech and data skills to lead operational developments. Mercer proposes that 43% of companies are already redesigning jobs and revising workforce plans to close skills gaps. In turn, as business processes and employee profiles evolve, we will see significant organisational changes across all industries over the course of the next decade and, therefore, organisations are going to need workplaces that can facilitate these tech-driven changes.
All in all, we are looking forward to a lively year for the commercial real estate market as organisations look to expand and transform their portfolio. The next decade is going to present a host of new challenges for business leaders and, with early signs of improving corporate sentiments, 2020 looks set to be a year in which organisations start to enact their growth and development plans. These plans will serve to reshape their real estate requirements.