Global Real Estate CFOs Worry About 2023
A Deloitte survey shows inflation, workforce management, and cyber risk to be top concerns.
There are a lot of wary big real estate operations globally, according to a new survey by Deloitte. A survey of 450 CFOs of the organizations across North America, Europe, and Asia/Pacific showed serious revenue concerns. Included were real estate companies with assets under management of at least US $100 million.
“While 40% of respondents expect their revenues to improve compared to last year, 48% see revenues decreasing, and 12% expect no change,” the report said. “In contrast, last year’s survey results were much more optimistic: 80% of respondents indicated revenue expectations would be slightly to significantly better than the prior year. Of course, those expectations came in the wake of a very challenging 2020.”
In the face of lower revenue at many, a third said they’re planning to cut costs. That compared to only 6% last year expecting to work on reducing expenses.
The top risks to revenues over the next 12 to 18 months that companies mentioned were three-fold: high inflation, workforce management, and cyber risk. In North America, tax policy changes were the biggest concern among 37%.
Inflation is easy to understand, at least in the U.S. Higher inflation—and it rose again in August, even with significant drops in energy prices, which had been the biggest driver—means the Fed will continue to increase its benchmark interest rate, and the cost of financing will closely follow.
Workforce management has more extensive meaning in real estate than to other industries. For most companies, concern about workforce means ensuring they can hire enough people with the right qualifications in time and in the right places.
Those meanings exist in real estate, as well. But remember that many parts of CRE depend on leasing space to commercial ventures that need it. There are significant tensions between employers and employees in coming back to the office. But then, given the tight labor market, many companies, particularly medium- to small-size, are having significant difficulties getting staffing. Restaurants, retail stores, manufacturing sites, warehouses. The harder it is to get help, the less likely companies will expand their use of real estate and the less money companies make.
Cyber risk is an ongoing issue across all the regions that Deloitte surveyed. However, the firm offered no details.