Why CRE Insurance Costs are Poised to Surge

Natural Disasters and Rising Insurance Costs: Impact on CRE

Natural Disasters Are Increasing In Frequency And Cost ​

• Natural disasters with total damage costs exceeding $1 billion have steadily risen since the 1980s ​

• The U.S. now averages almost 22 natural disasters per year, up from about 13 in the 2010s ​

• Over 21 natural disasters with at least $1 billion in associated damages have already occurred in 2024 ​

Insurance Costs Have Surged Due To Increased Risk ​

• Apartment insurance rates doubled from 2019 to 2024, with a peak growth pace of 35% from 2023 into early 2024 ​

• High-risk states like Florida and California have seen outsized insurance rate hikes ​

• Rate increases spread throughout the U.S. due to insurance providers’ risk diversification models​

Rising Costs And Risk Impact Investor Decision-Making ​

• Insurance costs are 8-10% of total expenses, influencing underwriting ​

• Rising rates affect migration, with some homeowners leaving high-risk states like Florida ​

• CRE sectors like self-storage, industrial and retail could see shifts in space demand as people move ​

*Through 3Q ​
Sources: Marcus & Millichap Research Services, RealPage, Inc.​

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