Kent’s property sector remains optimistic despite the tough economic climate, with most people predicting growth over the next two years, a survey has revealed. Industry leaders from across Kent’s property sector gathered in Faversham recently for the Property Outlook 2023 event, co-hosted by law firm Brachers, Caxtons property consultants and accountancy firm Crowe.
The event explored the opportunities and challenges faced by the sector through presentations by industry experts, including a keynote speech from Phil Eckersley, the Bank of England Agent for South East and East Anglia.
While there are undoubtedly challenges facing the sector, fuelled by tough economic conditions, there was refreshing optimism among attendees. When surveyed, over 70% of attendees predicted year-on-year growth in turnover and profit over the next few years. Nonetheless, difficulties around the recruitment and retention of staff and inflationary pressures (including wage increases and the rising cost of materials) remain the main obstacles to growth.
Sarah Gaines, Partner and Head of Commercial Property at Brachers, remarked: “It’s great to see long-term confidence in Kent’s property market and predictions of growth from the businesses operating in it. With demand for office and industrial space still high, combined with the ongoing take up at Kent’s science and business parks, there is a lot to feel positive about. Kent is well-placed to weather most storms due to its relative affordability, plus its proximity and transport infrastructure for access to London, the rest of the UK and Europe. Overall, the sector in the south east is marked by its adaptability and resilience.”
On a further positive note, sustainability remains high on the agenda with 70% of the businesses surveyed seeking to reduce their carbon emissions. Simon Crookston, Head of Corporate Tax at Crowe, noted: “The property sector is a significant contributor to global greenhouse gas emissions, and achieving net zero emissions in this sector is therefore crucial. Just over a quarter of businesses stated they are aiming to be net zero within the next two years, while another 44% said they wanted to reduce CO2 emissions during this period.”
Unsurprisingly, cost was the biggest barrier to businesses reaching net zero or moving forward with their sustainability agenda. Many buildings were constructed before energy-efficient technologies and building codes were in place, so they require significant upgrades to reduce their emissions. Crookston continued: “A third of businesses stated that retrofitting their existing buildings cost effectively would be a major challenge as their buildings were either listed, leased or had shared occupancy. Nonetheless, property owners need to consider the long-term benefits of retrofitting, such as lower energy bills, increased property value and reduced maintenance costs. Ultimately, for organisations within the property sector, it will be a balancing act between pursuing their planned Environmental, Social and Governance (ESG) agenda and remaining flexible and profitable, as they face inflation and increasing costs because of global challenges outside of their control.”
Since the pandemic, many businesses have re-evaluated their office space considering the hybrid-working revolution and the ongoing drive for sustainability. Over 80% of the businesses surveyed at the Property Outlook event operate a hybrid office/work-from-home mode. However, most businesses’ office space strategies have now crystalised, with few intending to shed square footage in the near future. Charlotte Laherty, Director, Head of Commercial Property Management & Investments at Caxtons, noted: “It was interesting to see that the sentiment of the businesses who attended Property Outlook 2023 was, by and large, reflective of the trends highlighted in the February 2023 update of the Kent Property Market Report.
Most businesses (74%) who participated in the event survey do not expect to change their office footprint over the next two years, suggesting that the dust has settled as work patterns have evolved.
“Of those who expect to either increase or decrease their office footprint, nearly 80% expect to move premises to achieve this. It is notable that more than 64% of survey respondents have already or expect to change their interior office space layout to allow better for flexible working.”
Charlotte Laherty, Director,
Head of Commercial Property Management
According to Caxtons, Kent has only been marginally affected by companies reducing their floor space as it has fewer large floorplate office buildings. However, the company has seen signs of new office requirements, on average, being smaller than before – with newly formed companies and smaller SMEs opting for serviced office space.
Within the county, commercial property remains particularly attractive. As Laherty comments: “Expectations at the Property Outlook event were that the focus for property development investment across the next two years is likely to be commercial property (44%) and residential (31%). Indeed, Kent continues to offer lower commercial rents and land values than the south east as a whole and therefore remains one of the more popular locations for occupation or investment and development in the UK.”