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ising property insurance costs are squeezing commercial real estate owners, driving down net operating incomes and impacting valuations and transactions. A report by the Urban Land Institute (ULI) and Heitman highlights the challenges posed by increasing insurance premiums, frequent weather-related claims, and regulatory pressures.

    According to Laura Craft, Global Head of Portfolio Sustainability Strategies at Heitman, investors are taking on more risk and initial costs as insurers reprice policies to limit payouts. The report offers strategies for securing affordable insurance coverage and navigating the evolving landscape.

    Lindsay Brugger, Vice President of Urban Resilience at ULI, notes that natural catastrophes are costing the global insurance market tens of billions of dollars, leading to rising premiums and uncertainty in the commercial real estate market. She emphasizes the need for strategic management of physical climate risk to build resilient portfolios.

    To manage rising costs, investors will need to identify creative coverage opportunities and manage physical climate risk strategically. The report also warns that trends in the single-family residential insurance market could have implications for commercial real estate, including insurance-driven migration, a growing protection gap, and solvency issues with government-backed programs.