Kent’s property sector forecasts growth for year ahead

Kent’s property and construction businesses remain optimistic despite the unsteady economic environment, with more than 86 per cent predicting growth in the coming year, a survey has revealed.

Industry leaders from across Kent’s property sector gathered in Faversham last week for the annual Property Outlook event, co-hosted by law firm Brachers, Caxtons Property Consultants, and accountancy firm Crowe.

This year’s event explored the sector’s challenges and opportunities through speeches by industry experts, including Kieran Dent and Patrick Campbell of the Bank of England’s South East and East Anglia Agency.

Every year, attendees are surveyed on a range of questions touching upon the economy and business confidence.

Optimism among property professionals appears to have been buoyed by last week’s news that inflation has fallen to 2.3 per cent – down from the 40-year high of 11.1 per cent in October 2022.

Likewise, the announcement that GDP has grown by 0.6 per cent in the first quarter of 2024, lifting the UK out of technical recession, will have raised spirits.

When surveyed, 86 per cent of attendees predicted year-on-year growth in their business’ turnover and profits over the coming year. This is up 12 per cent on last year’s responses.

Nonetheless, inflationary pressures like material costs and wages, and issues around the recruitment and retention of staff, remain the most reported obstacles to growth. 

Ash Jilani, commercial property partner at Brachers, said: “Kent’s property sector is known for its resilience, but it’s had to withstand a raft of economic shocks over the last few years, from the pandemic to geopolitical unrest.

“The sector has undoubtedly felt the pinch due to rising overheads, with 60 per cent of attendees reporting that people-related cost increases are having the greatest impact on their business, while 30 per cent suggest that material costs are taking a toll.

“However, now that energy and fuel costs have come down, their impact is naturally lessening, with only 7 per cent of respondents reporting such costs as having the greatest impact.

“One would hope that as the benefit of dwindling inflation begins to trickle through the economy, the financial pressures on Kent’s property businesses will be further alleviated.”

As with many businesses across the county, balancing growth with sustainability remains a key challenge.

Simon Crookston, corporate tax partner at Crowe UK, said: “While being net zero is not yet a strategic objective for most businesses in the property and construction sector over the next two years, almost half said they were committed to significantly reducing their emissions over the next two years.

“This indicates a growing recognition of the importance of sustainability and the need to mitigate environmental impact, even if immediate net zero targets are not feasible.

“For many businesses, the primary challenge to achieving net zero or advancing sustainability in the property and construction sector is cost.

“Implementing sustainable practices often requires substantial initial investments in new technologies, materials, and processes.

“For instance, energy-efficient systems, renewable energy installations and sustainable building materials are typically more expensive upfront compared to traditional alternatives.

“Additionally, there are costs associated with retrofitting existing buildings to meet higher sustainability standards.”

Despite these challenges, business confidence within the sector remains high.

Mark Coxon, director (business space M25 South East) at Caxtons, added: “It was good to hear that three quarters of attendees felt that confidence in the property and construction sector would increase over the year, and another 17 per cent felt it would stay the same,

“This aligns with Caxtons’ findings in our annual Kent Property Market Report published last November.

“That report found that there were tentative signs of recovery, but our recent May update showed that the Investment Property Forum (IPF) and others are predicting an improvement in UK property performance in 2024.

“Falling interest rates are supporting subdued rental growth and a stabilisation of capital values for first class assets, ahead of a more sustained recovery in 2025. 

“Increasing rents in some sectors and the number of projects underway, particularly in the industrial and distribution sector, also show that confidence in the sector is increasing.

“When asked what one thing government could do to significantly help the property and construction industry, 35 per cent said planning reform – the top result by a good margin.

“We know developers and investors find planning frustrating, particularly in Kent where nutrient neutrality rules in Ashford and East Kent continue to prevent construction of a large number of much-needed homes.

“Although constructive dialogue is underway, there’s still no solution in sight.”