Small business sentiment in the US dropped significantly in January, with inflation and labor costs cited as the primary concerns. The National Federation of Independent Business reported the largest decline in sentiment in 13 months, with 20% of business owners citing inflation as their top concern and 39% struggling with labor issues.
So I will pair that up with data from the SMB Group in their new release, “2024 SMB Priorities: Aligning Technology Investments to Business Requirements,” key findings include SMBs feeling confident in their ability to navigate challenges, seeing technology as providing cost and time savings, prioritizing investment in new technology for automation, and willingness to pay extra for AI capabilities. Worries about inflation and the risk of recession are lessening slightly compared to last year. More importantly, despite these and other challenges—from supply chain disruptions to geopolitical conflicts—most SMBs are confident in their ability to cope. 39% of SMBs feel very prepared, and 52% feel somewhat prepared to navigate these issues successfully.
According to a report from CBRE, 58% of the largest U.S. office leases in 2023 were renewals, indicating that many companies are opting to stay in their current spaces rather than seeking new ones. This shift is attributed to the hybrid work model and the desire to reduce costs. While companies are leasing less space overall, they focus on higher-quality offices in prime locations to encourage more in-person work. Manhattan and Silicon Valley had the most square footage among their large office leases.
Why do we care?
That’s a significant shift from 2019, when 68% of the top 100 were new leases, and 32% were renewals. Employers are shrinking their office space. The way companies use office space is changing. This would always take time to convert, as real estate leases are long and expensive to break. Technology investments that help utilize office space more efficiently will be welcomed.
Broadly speaking, SMB owners are optimistic, but it’s fluctuating. There’s a disconnect between the vibes and the data of the economy, and we’ll see that continue. Lean into owners’ ability to execute and focus on business outcomes. You’ve heard their concerns – address them.