A new year brings a host of changes beyond flipping a page on the calendar. Before settling down to holiday festivities, it’s time to prepare for the year ahead. So much has happened in 2023. For some, business boomed, while others struggled in the aftermath of the pandemic. AI is poised to be a huge disruptor, interest rates have failed to halt inflation, and the economy is teetering on disaster. In business, as in life, there are no assurances, so it’s best to be prepared for whatever lies ahead.
Navigating the business world in 2024 will require keeping an eye on several core factors, including economic trends, technology advancements, and global events. These elements will have a direct impact on businesses of all sizes, shaping opportunities and challenges in the year ahead.
The year 2024 is shaping up to be a critical juncture for the global economy, with several factors converging to create a complex landscape for businesses. One of the most pressing concerns is the state of interest rates. According to a U.S. News & World Report report, mortgage rates, which often serve as a barometer for interest rates, are expected to remain elevated. The Federal Reserve has been on a rate-hiking spree, raising the federal funds rate multiple times to control inflation. This has led to mortgage rates reaching a peak of 7.23% in late 2023, and they are not expected to fall below 6% until 2025.
The U.S. is not alone; economies worldwide are grappling with similar issues. The ongoing war in Ukraine and the alignment of Russia and North Korea have added another layer of complexity, affecting everything from oil prices to cybersecurity.
This high-interest-rate environment is a double-edged sword for businesses. On one hand, it increases the cost of borrowing, affecting companies’ ability to invest in new projects or expand existing ones. On the other hand, it is a symptom of inflation. The Federal Reserve’s aggressive rate hikes aim to bring annual inflation back to its 2% target, but these adjustments will be challenging for businesses, especially those with tight margins.
Businesses will continue to contend with supply chain issues. The disruptions caused by the COVID-19 pandemic have had a long-lasting impact, and the ripple effects are expected to continue into 2024. Companies are now more cautious than ever about their supply chain strategies, investing in both diversification and digitization to mitigate risks.
Price hikes in raw materials and transportation costs will likely continue, squeezing profit margins. Companies must be agile, perhaps revisiting their supply chain strategies or exploring automation to offset labor costs.
The green economy is showing promise as a more sustainable and, surprisingly, cost-effective alternative. Walmart, for example, has already made significant strides in this direction, reducing operational costs by transitioning to electric vehicle delivery fleets. Additionally, customers will continue to demand companies adopt socially responsible and environmentally sound business practices. Those who fail to do so may see declining sales.
The data economy is also expected to be a significant trend in 2024. As businesses generate more data, the potential for monetization grows. Companies like John Deere are already selling data back to consumers—in this case, farmers—to improve productivity. This trend is expected to gain traction, especially as businesses seek alternative revenue streams in a challenging economic environment.
The upcoming 2024 U.S. presidential election adds another layer of complexity to the economic landscape. The election’s outcome could hinge on various economic factors, including inflation rates and employment levels. The public sentiment about the economy will likely play a significant role in determining the election’s outcome. If real incomes continue to rise and inflation rates stabilize, the incumbent administration could gain favor, potentially leading to policies that continue current economic strategies.
The election’s outcome could result in significant economic adjustments. Businesses should have contingency plans, and some might hold off on significant investments until policies become clearer, potentially leading to a period of economic stagnation.
The workforce landscape continues to experience seismic shifts. The younger generation, those under 30, are entering the job market with a distinct advantage: a natural familiarity with technology. This demographic is not just tech-savvy; they are tech-integrated, having grown up in a world where digital is a way of life. Their skills in programming, data analysis, and adaptability to new tools are assets for many modern workplaces.
However, this technological edge comes with its own set of challenges. As automation and artificial intelligence become more prevalent, especially in fields like marketing and content creation, the demand for human creativity is also evolving. The creative roles of tomorrow will require mastery over new tools that are just now appearing on the horizon.
While younger workers quickly adapt to these changes, businesses, especially local small to medium enterprises, find themselves at a crossroads. On one hand, there is an increasing demand for highly specialized skills; on the other, a significant portion of the job market is not yet ready to integrate these advancements.
According to Bankrate’s quarterly Economic Indicator poll, employers are expected to add roughly 29,000 new positions each month between now and June 2024. Some experts predict the unemployment rate will increase during the first half of 2024 but rebound by mid-2025 as interest rate cuts spur investment spending.
Remote work is no longer an exception but a norm, especially for tech-savvy younger generations. Companies need to adapt to this reality by offering flexible work environments that cater to different needs. Hybrid work models are now a long-term strategy that can offer businesses a competitive edge in attracting top talent.
The “Great Resignation” that started in the wake of the pandemic is far from over, but experts predict those recently employed will remain in their positions for at least 2024. Employee well-being and mental health remain front and center in job considerations. Companies that fail to adapt to these new workforce expectations may struggle to attract and retain talent.
As automation infiltrates the workplace, leveraging soft skills for tasks requiring a human touch will become critical in the years ahead. Gen Z is expected to make up 30 percent of the workforce by 2030, despite many leaving over lack of job satisfaction. Coupled with Gen-Z’s lack of social skills, companies are expected to increase their investment in developing and nurturing skills and attributes such as emotional intelligence, communication, interpersonal problem-solving, high-level strategy, and thought leadership.
The U.S. Department of Labor (DOL) recently proposed increasing the minimum “white collar” salary level needed to qualify for the overtime exemptions under the Fair Labor Standards Act. The proposal would raise the qualifying weekly salary level by more than 50% from the current $684 to $1,059 per week. The annual salary level for highly compensated employees would increase from $107,432 to $143,988 annually. The DOL has also proposed automatically updating these earnings thresholds every three years.
To avoid paying overtime, employers might reduce worker hours or hire more part-time workers—moves that will impact the workforce. Businesses will need to tread carefully to avoid scaring away the already scarce applicant pool.
Artificial Intelligence (AI) continues to be a game-changer. Its integration into the workforce has been a topic of considerable interest, especially given its potential to revolutionize various sectors. While smaller companies are often seen as more agile in adopting new technologies, larger corporations face unique challenges that can make the AI adoption process more complex and less straightforward.
A report by Deloitte highlighted the difficulties that larger organizations face in implementing AI successfully. The report surveyed 2,620 executives across 13 countries and found that while 94% considered AI critical for success in the next five years, many are struggling with mediocre results despite increased deployment activity.
The challenges are multifaceted, ranging from a lack of executive buy-in to inadequate funding and technical skills among staff. As AI projects scale throughout an organization, these issues become more pronounced, often leading to less than satisfactory outcomes.
Another layer of complexity arises when AI is integrated into daily workflows and organizational culture. About 46% of companies cited challenges in weaving AI into daily operations, and 44% said the software was too complex for many end-users to adopt. These responses suggest that the technical aspect of AI is just one part of the equation; the human element is equally crucial.
AI’s impact on small, local businesses is less pronounced and will remain a novelty. Tech-savvy companies will continue to utilize these advancements, but it remains to be seen how the technology will trickle down to other industries.
Technology and political leaders are rushing to implement safeguards to abate potential distributions to the workforce and the economy. Foreign threats in the form of deep-fakes and misinformation campaigns could affect political outcomes or feed societal unrest. The coming year will see increased advancements in AI as well as tools and policies to safeguard businesses and the general public.
Data privacy is another rising critical concern. With increasing scrutiny on how companies handle consumer data, businesses will need to prioritize data privacy and ethical marketing practices. Transparency in data collection and usage will be paramount, not just to comply with regulations but also to build consumer trust.
The marketing arena is evolving at breakneck speed, fueled by automation in content creation. But for local B2B companies, these tools may be out of reach or even unnecessary. While large corporations are investing heavily in automated systems to churn out highly targeted and tailored content, smaller businesses may find that a more personalized, hands-on approach still resonates with their audience.
Regarding social media, a recent report by the Content Marketing Institute revealed LinkedIn as the clear winner for organic B2B marketing. Facebook had the lowest ratings, with 37% of content marketing saying it was not very or not at all effective.
Perhaps most surprising is that nearly 50% of marketers felt in-person events produced the best results, followed by virtual events and research reports.
Voice search optimization is another area where marketers will need to adapt. With the increasing popularity of voice assistants like Siri, Alexa, and Google Assistant, optimizing digital marketing strategies for voice search will be essential. This doesn’t mean just tweaking SEO strategies; it means rethinking how information is presented to ensure it aligns with voice-based queries. Structured data, featured snippets, and local SEO optimization will play a crucial role.
Chatbots and conversational marketing are also set to evolve. Advances in natural language processing and AI are making chatbots more sophisticated and capable of initiating personalized conversations, gathering user preferences, and recommending products or services based on individual needs. For B2B marketers, this could mean a shift from generic customer service bots to more specialized, industry-specific bots capable of handling complex queries and transactions.
Augmented reality (AR) and virtual reality (VR) technologies have the potential to revolutionize the way consumers experience products and services. Providing interactive and immersive incidents, such as virtual fashion try-ons and real estate tours, will enable businesses to increase engagement and, ultimately, sales. Expect to see more major brands incorporating this technology in 2024.
Video marketing and live streaming will continue to be powerful tools for engagement. However, the key to successful marketing in 2024 will be personalization, authenticity, and value. Consumers are looking for content that solves their problems, educates them, or entertains them, and they can easily distinguish between genuine value and marketing fluff.
While print advertising may seem like a relic in the digital age, it’s proving to be a resilient and adaptable medium. It still boasts higher trust from consumers than digital advertising and elicits stronger emotional responses. Direct mail, for instance, continues to receive high response rates, making it a viable form of advertising. So, while the digital landscape is ever-changing, don’t discount the power of traditional media just yet.
Commercial Real Estate
The commercial real estate sector was hit hard by the pandemic, with a significant decline in asset values and an increase in vacancies. However, the industry is showing signs of stabilization. According to a report by Deloitte, U.S. office space utilization has steadied at just under 50% of pre-pandemic levels. The focus is now on quality over quantity, with newer, high-quality assets significantly outperforming the rest.
The shift towards remote and hybrid work models has led to a reevaluation of commercial space requirements. Office spaces are being redesigned to accommodate these new work models, absorbing more than 100 million square feet of unused space. However, the sector still faces challenges, including the need for significant reinvestment and upgrades.
The value gap between better-quality and lower-quality assets has clearly widened, making it imperative for investors and property owners to upgrade or reinvest in their existing portfolios.
Adaptive reuse of underperforming assets is becoming a viable option. Whether it’s converting office spaces to meet higher-quality demand or to comply with sustainability regulations, the commercial real estate sector is in a state of flux, and adaptability is the key to survival.
Retail spaces within the commercial real estate sector are also experiencing a resurgence. Despite several prominent retailers filing for bankruptcy over the past year, there is still healthy demand, and landlords remain optimistic they can quickly fill vacancies and push rents higher.
On the industrial front, the demand for warehousing and manufacturing spaces has skyrocketed, driven by e-commerce growth and reshoring initiatives. However, this boom comes with its own set of challenges, including a lack of available land and the need for a robust energy infrastructure to support these facilities. Regulatory incentives like energy credits and tax deductions are helping to some extent, but the sector still faces a supply-demand imbalance that needs to be addressed.
As we look ahead to 2024, the only certainty is uncertainty. Businesses that can adapt, innovate, and prepare for multiple scenarios will be the ones that not only survive but thrive in the coming year.