Managing Real Estate Risks in a VUCA World

May 15, 2020 | Ideas for Strategy, PlaceCORE

The current COVID-19 crisis has served as a clear reminder to all businesses about the volatility, uncertainty, complexity and ambiguity (or VUCA in short) of the world today. 

In the last 30 years (1990-2020), we have experienced quite a few significant crises – the 1997 Asian Financial Crisis; the 2002 SARS Outbreak (Severe Acute Respiratory Syndrome); the 2008 Global Financial Crisis; the 2012 MERS Outbreak (Middle East Respiratory Syndrome) and now, the COVID-19 Pandemic.

The real estate industry faces especially high levels of risk and real estate developers that survived the earlier crises have done so through mitigating risks and putting in place relevant guidelines to ensure that they are “crisis-ready”.

Long-Term Perspective

Through modern technological advances, the real estate development process from concept and design to physical development, to completion and commissioning has greatly improved. Nevertheless, the long gestation duration required for most medium- to large-scale real estate projects exposes these investments to unpredictable market forces and crises as seen over the last 30 years.       

As such, to be “crisis-ready”, investors in real estate development need to adopt a long-term perspective in mitigating risks.  

Case Studies

In my 25 years (since 1992) of being directly involved in many real estate projects regionally, I have had the privilege of guiding some fairly large-scale projects through a few major crises successfully, and have gleaned many valuable lessons on how to be “Crisis-ready”. 

Let me introduce 3 project case studies to illustrate some key learning points:

Project A took place in the Philippines in 1997. The group I was representing had a long and established track record in the Philippines. As such, we were able to team-up with a very strong local partner with a sterling reputation in a 50:50 Joint Venture (JV) to undertake real estate investments. The Asian Financial Crisis which began in 1997, directly impacted the Philippines by 1998. As such the freshly minted JV then was in danger of being abandoned. Objectively, it would have been understandable to dissolve the new JV given the rapidly mounting challenges brought on by the unfolding financial crisis. However, both partners were clear and confident of their respective objectives and the unique opportunity of forming a JV between two conglomerates. And as a new set-up, the JV was able to adopt a nimble attitude from inception. Thanks to the unified long-term perspective taken by both partners, the JV moved forward and was able to capitalize on opportunities thrown-up by the crisis and performed well and recorded a healthy ROI. 

Project B was another JV investment in the Philippines which started around 2001. The local partner and landowner was an established manufacturing conglomerate with a great market reputation. As the local partner was not a real estate developer, my company took the lead in this JV project. The key challenge in this project was the conversion of the land from industrial to residential usage. It would have been extremely difficult for my company – a foreign company in the Philippines – to maneuver the Filipino bureaucracy in the land-use conversion process. The JV partners were able to combine and complement their respective knowledge and network to secure all necessary approvals to successfully complete the JV project which consisted of about 1000 units of mid-cost residential apartments. The build-for-sale project sold well with a healthy ROI. 

Project C, unlike Projects A & B, was 100% owned by a foreign-based private real estate developer. For this project, we acquired some 20 hectares of raw land belonging to a 600-hectare Integrated Industrial Park (IIP) about 20km outside Ho Chi Minh City, Vietnam. When we acquired the land parcel at USD50 per square meter (psm) based on the gross land area in 2006/7 (before the onset of the 2008 Global Financial Crisis), the IIP hosting this land parcel was only about 40 to 50% developed and the surrounding areas were also not well-developed. Upon taking possession of the 20-hectare site, we completed the master planning in 9 months and started phase 1 residential housing development in 2008, just as the Vietnamese property market was nearing a peak (the Global Financial Crisis hit Vietnam from around mid-2010). All of the phase 1 residential units (about 250 units) were sold off-plan within 2 weeks of launching with healthy ROI. In 2011, despite a slowing real estate market, we divested about 30% of land parcel designated for retail and commercial development, within the 20-hectare master-planned site, to another foreign investor at about USD480 psm (based on the master-planned gross land area). In 2019, there were active bids from genuine buyers for the remaining residential land parcel at about USD800 psm of gross land area. The overall ROI for this project was outstanding.      

We can mitigate risks in real estate projects despite their long gestation period by following a few time-tested guidelines. Below I will use a simple 3-step framework to illustrate these guidelines that can help mitigate risks and ensure that your real estate investments are “Crisis-Ready”. 

The 3Ps Framework – People, Place and Perception: 

Disclaimer: This is a helpful guide for reviewing investments. However, this simple framework is not meant to replace comprehensive feasibility studies and in-depth evaluations. It provides an initial assessment to establish a base for further investigations and evaluations.   

People: Knowing and understanding the people you are working with as well as having the relevant people in terms of quality and availability is a fundamental starting block in all investment evaluation. Only with the right people (partners and manpower) in place, will strategies and action plans be executed, issues get evaluated, problems resolved and milestones accomplished. For Projects A & B, the reliability and capability of the local partners and execution teams were fundamental in delivering the respective successful outcome.

Place: Synonymous to location, this would be an overriding factor for all real estate-related investments. For Project C, the predictability and reputation of the master developer of the 600-hectare Integrated Industrial Park (IIP) was a major deciding factor in acquiring the 20-hectare parcel. The success of the 20-hectare site was directly linked to the success of the overall IIP development. As such the People factor is linked to the Place factor in this project. When assessing an unfamiliar place or location, in addition to the mandatory site and desktop surveys, spending time to chat with neighbors, business owners in the subject locality, etc. could reveal interesting and useful facts and history.

Perception: It is a fact that realities are defined by Perceptions. However, is equally important to note that perceptions are “realities” viewed through different “lenses”. Therefore, perceptions should be evaluated with a clear understanding of the sources and the different reference points. For example, farmers reluctant to embrace new changes and resistant to relocation, would not support a prospective modern integrated township development that will displace farmland; people with deferring vested interests would likewise offer skewed feedback. As such feedback from varying sources is helpful to provide more balanced insights to conclude from.

It is needful to emphasize that successful results recorded in the above case studies were possible because the necessary time and effort were taken to fully understand all ground conditions especially the backgrounds on partners and stakeholders involved.Additionally, the teams involved were duly guided by time-tested methodology and good ground support. Without which we would also be left floundering.


The VUCA environment that businesses are operating in requires those involved to be breaking new ground continuously. New ground could mean, venturing into a new market, starting a new business, developing a new product, managing a new team, or working with new management. New ground would often encompass a combination of the above and other factors as well – such as starting a new project under a new company in a new market with a new team and managing new stakeholders. These are all risks that we need to mitigate by ensuring that we are confident with the People we are working with; we are familiar with the Place (environment) that we are operating in and we are fully aware of the different Perceptions that we need to manage. 

 The writer is Lawrence Peh, Head of Integrated Development at Consulus (

Lawrence has over 20 years of senior management experience in real estate development and asset management in the ASEAN region. He headed Keppel Land’s Philippines and Bangkok operations (1997-2006); EVP/CIO of TCC CapitaLand Thailand (2006-7); Country GM of GuocoLand Vietnam (2007-12); CEO, ParkCity Hanoi Township (2012-18). He has directly managed township development and a wide range of projects including commercial, retail, and residential properties in various regional countries with a total AUM of over USD 3 Billion. He is currently Senior Advisor to Ricons Group and GDC Hanoi Group in Vietnam; Independent director with Hong Leong Bank Vietnam, Kinderworld International Group and Alpha International’s Vietnam Steering Committee

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