Resilience and Strategy: Preparing Real Estate for 2025 Risks

As the commercial real estate sector enters a critical year, owners and operators are navigating rising costs, workforce shortages, and climate-related risks. These challenges demand proactive strategies, yet stabilizing insurance rates and shifting market dynamics offer new opportunities.

Real estate leaders can adopt four essential practices to strengthen their resilience: managing operational costs, addressing workforce challenges, mitigating risks, and capitalizing on emerging stability. These approaches lay the groundwork for success in 2025 and beyond.

1. Streamlining Costs Amid Economic Uncertainty

High borrowing costs and increasing vacancy rates continue to put pressure on profitability. With $1 trillion in commercial real estate loans maturing in 2025, refinancing will remain a challenge for many. However, recent Federal Reserve interest rate cuts offer hope for reduced loan costs and improved demand.

Insurance premiums, a longstanding pain point, are beginning to stabilize in some markets. This shift creates a chance for owners to reassess risk exposures, adopt strong management practices, and secure competitive coverage. Prioritizing accurate valuations, timely maintenance, and tailored policies can help reduce costs and improve resilience.

Actionable step: Engage with your insurance broker to optimize coverage and align it with your specific property risks.

2. Enhancing Workforce Retention in a Tight Labor Market

Labor shortages, particularly in maintenance and security roles, have left properties vulnerable to safety risks and operational inefficiencies. For tenants, workforce challenges in sectors like retail and hospitality contribute to reduced operational capacity, further impacting landlords.

Personalized employee benefits, informed by data, can help attract and retain talent in this competitive market. Investing in building upgrades to create safe, appealing environments also improves tenant satisfaction and workforce engagement.

Actionable step: Use analytics-driven benefits strategies and prioritize facility improvements to strengthen recruitment and retention efforts.

3. Addressing Emerging Risks with Proactive Planning

Climate-driven catastrophes, such as convective storms, remain a top concern, with insured losses reaching $42 billion in early 2024 alone. Accessibility-related litigation, driven by third-party financing, is another rising threat, as non-compliant properties face costly lawsuits without warning. ADA violations often arise from outdated compliance protocols, and litigation is frequently initiated before owners have a chance to address the issue.

Proactive risk management—including compliance audits, disaster planning and cybersecurity measures—is essential to navigate these emerging challenges. Many real estate leaders have yet to fully integrate enterprise risk management (ERM) processes into their operations. This lack of preparation increases vulnerability to risks that could otherwise be mitigated through proactive planning and comprehensive strategies.

Actionable step: Regularly update compliance protocols and integrate disaster preparedness into broader risk management strategies.

4. Leveraging Market Shifts for Growth Opportunities

Falling interest rates and increased competition in the insurance market present new opportunities for growth. After years of challenging conditions, the insurance landscape is showing signs of relief. Insurers are achieving more balanced profitability through strategic premium adjustments and disciplined underwriting, which could bring some stability to rates in 2025.

Properties designed or retrofitted to withstand environmental risks are more likely to attract favorable insurance terms, while accurate valuations ensure fair premium assessments. Although coverage for catastrophic perils is expected to stabilize in many areas, high-risk regions may still face elevated premiums.

Real estate operators must adapt to these shifting dynamics by prioritizing maintenance, aligning strategies with market conditions and positioning their properties for resilience and long-term success.

Actionable step: Create risk management frameworks that maximize cost savings and ensure best practices are adhered to, making your facility a strong risk and one insurers are willing to take a chance on.

Building Resilience for the Future

By addressing operational, workforce and facility challenges with strategic planning, real estate owners and operators can strengthen their footing in 2025. Aligning with evolving market conditions and leveraging industry expertise will enable the sector to navigate uncertainty while achieving stability and growth.