The cost of insurance for property owners is steadily increasing, according to the Deloitte Center for Financial Services. They predict that by 2030, the average monthly insurance cost for a commercial building in the US will rise from $2,726 to $4,890 – an 8.7% annual growth rate.
This trend not only affects CRE ownership’s bottom line but can also lead to a decrease in overall property values. In fact, multifamily properties have seen a decline of 3.6% since Q4 of 2019 due to rising insurance costs.
Specifically impacted regions include South-Central (7.8%), Florida (6.8%), Houston (11.l1%), and Jacksonville FL (9/6%). However, some areas like Oklahoma City (-3/8%) and West Palm Beach (-5%) have experienced less severe declines in value.
Despite these challenges with rising insurance costs being one of the top six expenses for multifamily owners since 2019 – there are some positive developments on the horizon: renter demand remains strong leading to continued rent growth; moderation in Florida’s market; lower interest rates expected when Federal Reserve begins cutting them; absorption rates outpacing new supply which could drive above-average rent growth across most markets as well as stabilize cap rates.
In conclusion: while it may seem daunting at first glance given current trends towards higher premiums year after year- there is hope! As early as mid-2027 we expect that many markets will see their previous peaks surpassed thanks largely due improved demand coupled with falling interest-rates combined alongside shrinking pipelines resulting increased profitability levels industry-wide.
