Columns Newswire Management

Overcoming Stubborn Challenges to Resilience: Hub’s 2023 Real Estate Industry Outlook

With inflation reaching a 40-year high in 2022, interest rates will remain high and possibly continue to increase in 2023. Rising construction costs, as well as more frequent and extensive property claims, will exacerbate market challenges. Real estate owners and operators who understand their risks and embrace creative market solutions will have better insurance coverage options at lower cost. Heading into 2023, real estate owners and operators should take the following into account when it comes to their profitability, vitality and resiliency:

Climbing interest rates have made loans and refinancing more expensive and rates are likely to stay high and increase in 2023. Owners and managers must plan for further rate hikes and continued inflation, which will make it more difficult for their lessors to make rent.

The insurance market will be difficult. Various factors such as carriers’ increased scrutiny of insurance-to-value, rising construction costs and supply chain disruptions can make an already difficult insurance market even more challenging in 2023, with carriers pulling back on capacity and increasing insurance rates. Commercial property-casualty insurance is projected to rise as much as 20% in most geographies. Expect coverage for habitational and multifamily properties to rise about the same amount.

There are bright spots for top properties with lower risk profiles. For instance, underwriters are still offering coverage for fire-resistant, Class A, high-rise office buildings. Best-in-class property risks will find good coverage at a good rate. Carriers are more likely to offer coverage for properties where the owners or operators are actively trying to prevent damage or liability claims. Underwriters will target best-in-class properties and will require current building valuations before even considering risks.

This emphasizes the importance of working with experienced insurance advisors on initiative-taking strategies and risk management measures.

A shrinking workforce will pose challenges. Like many other industries, real estate companies are struggling to find capable employees. The labor shortage also is affecting real estate indirectly as construction companies are facing delays because they can’t find enough workers and vendors for maintenance, security and cleaning services, which are also facing staffing shortages. Real estate owners and operators can improve their own recruiting and retention through personalized benefits based on data analytics.

Work with an insurance advisor to develop a strategy that will protect your bottom line, support your workforce and build resiliency for 2023. To explore Hub’s full 2023 Real Estate Industry Outlook, please visit hubinternational. com/insights/outlook-2023/real-estate/

Frank DeLucia
Senior Vice President
Hub International Northeast