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Commercial real estate insurance rates on the rise

On Behalf of | Nov 22, 2019 | Commercial Real Estate |

Commercial real estate owners in California may be concerned about the growth they could face in property insurance rates. In 2019, there were 14 severe weather incidents across the country, including tornadoes, flooding and heavy winds that caused billions of dollars in damages to homes and commercial properties. According to an insurance broker, commercial property investors are paying higher premiums than they were a few years previously due to escalating costs attributed to natural disasters. Over the past eight quarters, property insurance rates have escalated for commercial real estate owners.

In past years, property insurance rates declined over 16 straight quarters, or four full years. Three major hurricanes, Irma, Harvey and Maria, caused commercial real estate insurance rates to begin to increase. In 2019 alone, office, industrial, hospitality and multifamily properties have seen their insurance premiums rise by 16% as an average. California property owners may be facing even greater increases than others because the state, along with Florida and Texas, faced more substantial losses linked to hurricanes and other natural disasters. Property owners in these areas have seen a 22% increase, but those in areas that have directly experienced weather damage have been paying rates of up to 50% higher.

Even when premiums themselves have risen less dramatically, many property owners have found themselves facing higher deductibles on their real estate investments. Percentage deductibles require owners to pay a percentage of the value of the insured property rather than a fixed amount. This can place a far larger proportion of the payment for damages on the property owner rather than the insurer.

Commercial real estate can still be a profitable and valuable investment, especially when owners negotiate protection from excessive insurance costs. A real estate attorney may provide advice to help investors secure a profitable stake in an office building, shopping mall or industrial property.