The most successful investors know how to protect their assets, whether through hedging or insuring against inevitable risks. In commercial real estate, property insurance has long been the primary defense against damage. However, recent events — such as  Hurricane Katrina in 2005, Harvey in 2017, Ian in 2022, and Helene in September of this year — are evidence that risks to property damage are on the rise. The increasing frequency and ferocity of storms, coupled with changes in property insurance structures, mean that traditional coverage alone is no longer sufficient. Today, investors must ensure their properties are resilient to these growing challenges.

Commercial real estate news site GlobeSt. reports many reasons for rising property insurance costs. There was a record hit to property insurance companies in 2023, causing a reassessment of how insurance policies are structured. Remote and hybrid work has increased the amount of time people spend at home, thus increasing fire risk. For industrial properties, insurers prioritize proper sprinklers and pay special attention to the risk of tenant turnover, especially in older buildings. Environmental risks are the primary area in which insurance companies are seeing higher and higher losses, resulting in increased premiums (sometimes up to 300% in one year) and restructured policies that, in some cases, raise the floor at which coverage kicks in. All of this means a higher risk to property owners.

With greater financial risk, comes higher costs up and down the real estate ladder: insurers, owners, tenants, residents, and investors. To mitigate the environmental risks, owners can work with specialists who will provide a Property Resilience Assessment. These assessments provide a detailed plan and cost analysis, helping owners prioritize improvements to their property that protect them from costly repairs associated with environmental events that threaten the built environment, particularly their own assets.

Albert Slap, Coastal Risk Consulting President, provides a Property Resilience Assessment, which has three stages:

1. Identify the natural hazards likely to affect a property
2. Evaluate the risks posed by those hazards AND the capacity of the property to prepare for, adapt to, and withstand/recover from those hazards
3. Identify conceptual resilience measures to enhance property-level performance and recovery

Property owners should retrofit their buildings to maximize performance during whatever extreme weather events are likely to occur in the region where the asset is located. As recent hurricanes have demonstrated, these impacted areas are sometimes farther away than traditionally considered (Asheville during Hurricane Helene). Since capital improvements are cost-intensive, working with a professional to ensure the improvements are the most efficient and effective will save money in the long-run.