Transforming turbulence into opportunity

We spoke to Managing Partner, Matthew Samuel-Camps about the economic picture against which we are setting out our future growth plans, and discuss how we are evolving to ensure we remain best placed to support our clients in making the most of the opportunities that are available to them.

As 2022 gets into full swing, tumultuous times prevail as Omicron and other variants make themselves known.

Thankfully, Omicron infection rates appear to be plateauing and businesses are returning to their workplaces in droves, but potential challenges remain. We explore some of these, as well as discussing the opportunities as we see them.

Costs crisis

The wider economic picture, however, feels less certain. Interest rates appear to be on an upward trajectory and, along with it, the cost of living which is at its highest point since 1992.

Whilst we are likely to see smaller interest rate rises as the year goes on, we don’t expect this to resemble what we’ve seen in years gone by.

What we will continue to see is a significant price inflation – not just in terms of the cost of living crisis we are currently experiencing, but also in relation to building materials, where there has been a worldwide shortage owning to global demand.

This, together with skills shortages, the Brexit effect and the impact of COVID-19, is having a significant impact on project costs.

We remain heavily reliant on foreign imports and a heady mix of low inventories, shortage of labour, increased input costs and high demand, has increased the cost of building materials, which have risen by 10%, on average. Indeed, in the last 12 months, some, such as steel and bricks, have gone up by as much as 40%.

This is putting pressure on project viability and will be a significant challenge for developers over the next 12 months and beyond. Indeed, the knock-on effects for occupiers as a lack of space impacts rents and prices, will be something to watch.

Bridging the skills gaps

We are seeing significant skills shortages here in the UK as many older workers have left employment early, whilst younger generations remain in education. Together with diminishing foreign labour, this problem is reaching a critical point, which as  a country, we are struggling to address in a meaningful way.

This is particularly concerning for business leaders, who recognise that it will take a generation for any solutions implemented now, to filter through to the market.

What is heartening to see, however, is the way that industry is responding, by forging stronger relationships with the education sector.

This will help to improve the alignment between what businesses need, and the skills that are delivered. However, we will need to see more collaboration if we are to ensure that the rights skills are brought to market over the coming years.

Employers are being forced to consider a wider range of educational backgrounds and that is a good thing – not just forcing everyone through to higher education when it might not suit them.

With this in mind, it is encouraging to see the rise in popularity and prevalence of apprenticeship schemes particularly for us, in property related roles.

Meanwhile, as an industry, we need to see much more investment in equality and diversity. Just 13% of qualified surveyors are women and less than 3% are from ethnic minorities. We would welcome much more diversity in the profession, and this is something which, as a business, we too are focusing on.

Market opportunity

From a commercial point of view, we will continue to see an acute shortage of industrial property supply, and this will continue to drive investment and land values up, as well as associated rents.

Whilst the industrial boom is expected to continue, much to the delight of investors, the lack of pipeline industrial supply is concerning and the potential economic impact this could have on stifling business growth, could prove significant.

We never recovered from the historical industrial land loss of the 1980s, where much industrial stock was converted to offices. Now we are seeing employment land being lost to residential as Brownfield schemes are encouraged but the employment land is not being replaced fast enough.

Over the last 18 months we’ve seen significant land value inflation here, and similar pressure for last mile logistics and online retail as this continues to rise. This represents a significant opportunity for investors, but also a challenge.

Well located employment land and land release is vital and we would welcome more forward thinking from Local Planning Authorities around the provision of employment land across the region.

Meanwhile, the pressures on retail will likely continue into 2022 and beyond, as the effects of the pandemic and the resulting changes to retail habits will put more pressure on our ailing high streets.

With this in mind, there remains a significant question mark over the future of our town centres and how they will be repurposed – not only to keep them alive, but to ensure that they will last the test of time.

Town centre evolution

We need to see a more holistic view which intertwines future lifestyle and consumer habits, with environmental, transport and infrastructure needs.

To achieve this, we expect to see much more research-led design, bringing together technology, AI and the Internet of Things (IoT), to predict how our town centres will operate in the future, so that the built environment can be constructed with this in mind.

This is where collaboration in the redevelopment and redesign of our town centres will lead to the design of conurbations to create an environment where people will want to live, work and shop – a place where they can do so harmoniously and in an environmentally friendly way, using Smart Grid technology.

Environmental consciousness

Alongside smarter cities, we will see ever greener buildings too, as the focus on carbon neutrality spurred on by COP26 in 2021 continues, ahead of carbon emissions targets over the coming years.

This focus on reducing carbon emissions, both by occupiers and developers, could result in more refurbishment of buildings, as opposed to demolition and rebuild.

There is a huge opportunity for corporate occupiers, landlords and investors / developers here, as the flight to office and industrial quality continues.

The environmental credentials of buildings will grow in importance, and those that invest in reducing the carbon footprint of their investments will win out with occupiers and compete better come disposal.

Make the most of the changing landscape

These remain uncertain times, but our teams continue to have their hands on the pulse of what is going on in the market. We will take this into account in the way we support you and will help you to navigate through the changing property landscape this year.

As always, we will look to exploit opportunities as they present themselves, particularly in the renewables, energy and town centre sectors which are a significant growth area – both for our clients, and our own business.

With this in mind, we continue to forge closer links with educational bodies and businesses around our own future needs, exploring ways we can improve our client offer, and collaborating to ensure we bring different skills into our business, from data analysts to career development managers –to make it more resilient and to provide stronger platform for growth.

Over the past 5 years, we have grown the business by 50% and we would love to think that we can continue that over the next five years, as we launch our new three-year plan which, just like the last, remains founded on Vail Williams being a values-centred business.