Foundations of Real Estate in the Philippines in 2024

The real estate sector in the Philippines is poised for a resurgence and is expected to rebound to pre-pandemic levels in 2024. This growth is being driven by increased demand across various sectors, particularly due to the surge in e-commerce activities and supply chain optimization. According to the Accredited Real Estate Salespersons of the Philippines (ACRES), Overseas Filipino Workers (OFWs) are the primary purchasers of real estate in the country, with estimated sales reaching P1 trillion.

Despite these promising projections, the sector still faces consistent challenges. Office vacancies have reached historic highs, indicating ongoing difficulties, while industrial properties are showing early signs of softening in response to shifting post-pandemic demand. However, segments like retail and multifamily housing demonstrate resilience amidst market fluctuations.

Escalating construction costs and insurance premiums pose significant risks, highlighting the critical importance of implementing precautionary risk management strategies to protect investments. High inflation rates have further compounded these challenges, squeezing profit margins and increasing financial vulnerabilities. Additionally, uncertain trends in interest rates and market volatility add complexity to investment decisions, necessitating thorough risk assessment and effective mitigation measures. Regulatory constraints and affordability issues in the housing sector present additional obstacles to expansion and development initiatives.

Here are preventive measures to navigate the complexities of the market landscape and position yourself for long-term success:

  • Cyber security: In today's digital landscape, cyber risks loom large for companies across all sectors, including the real estate industry. Prioritizing the review and improvement of cybersecurity measures, along with implementing comprehensive training programs, is imperative to effectively mitigate risks. Cyber insurance serves as a crucial preventive tool, providing financial support and resources for the aftermath of cyber assaults.

  • Liability Mitigation: Liability concerns are significant for real estate companies, with slip-and-fall incidents and property damage claims posing constant threats. By implementing proactive measures and adhering to regulations, companies can minimize the risk of costly legal disputes and maintain trust with stakeholders. Liability insurance acts as a safety net, protecting businesses from the financial burdens associated with legal battles.

  • Reputation Protection: Potential internal discord and allegations of mismanagement can significantly tarnish a business’ reputation, leading to erosion of trust among stakeholders, negative public perception, and ultimately, damage to brand credibility and profitability. Implementing preventive protocols such as thorough governance measures and regular audits to prevent conflicts and maintain transparency will diminish reputational risks. Director's and Officers' Insurance will also help shield executives and board members from personal liability, assuring strategic decision-making. Meanwhile, Reputational Insurance safeguards against damage to a company's brand and credibility, providing resources to manage crises and rebuild trust with stakeholders, alongside proactive reputation management strategies like proactive communication and ethical business practices.

In the dynamic landscape of commercial real estate, stakeholders must adopt a proactive approach to risk management to thrive. The consequences of complacency are severe – including financial losses, legal liabilities, and reputational damage. Real estate businesses must implement robust risk mitigation strategies, prioritizing cybersecurity, liability protection, executive liability coverage, and reputational defense to secure a brighter future for the industry.

For further questions or assistance in understanding more of these risk management strategies, feel free to reach out to Lockton Philippines at (opens a new window).