The Risk for Property Insurers

Extreme weather, revaluations, rising material costs — these and more have come together the past few years to create quite the challenge for property insurers nationwide. And no longer is this challenge confined to certain areas. It’s every state’s problem now. Also for today, new statistics show tourism and lower rents are driving a bit of a turnaround in Manhattan’s retail real estate market.

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— Tom Acitelli, Deputy Editor

Property Insurance Is a Nationwide Challenge Now, and It's Not Getting Easier

The real estate and construction industries stand at the intersection of finance, politics, celebrity and government. But one thing that inexorably ties together this interplay of labor, land and money is the management of risk. And, with the cost of that risk rising sharply, commercial real estate nationwide has been clobbered by the price of insurance. “This is a house on fire, and insurance is one of the first things my members talk about,” said Sharon Wilson Géno, president of the National Multifamily Housing Council (NMHC). Her members revealed in a recent poll that insurance for multifamily projects had soared 26 percent in the past year. “It’s impacting existing properties and new starts. It’s turning projects that were once viable upside down.” A vicious cycle of revaluations of replacement costs, inflation, growing climate change risk, and rising material costs has made soaring insurance rates an unfortunate cost of doing business.

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Manhattan Retail Market Riding Tailwinds of Strong Tourism and Lower Asking Rents

The Manhattan retail market is making strides thanks to an increase in tourism and lower asking rents enticing tenants to sign deals, according to a new report from the Real Estate Board of New York. A report on the first half of 2023 from REBNY found that in 10 of the 17 retail corridors examined in Manhattan, lower asking rent was driving a return of retailers with streamlined business models, such as Century 21’s reopening 22 Cortlandt Street with 100,000 square feet or Barnes & Noble’s re-emergence from the pandemic in the Upper East Side with 16,744 square feet at 1556 Third Avenue. From January to June of this year, asking retail rents were 30 percent below their 2016 peak in 13 of the 17 corridors, according to REBNY. But landlords are having to give away fewer concessions and asking rents are on the rise as major retailers sign leases for spaces that are smaller than pre-pandemic norms, but large nonetheless, REBNY found.

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