Real Estate CAE Real Estate Market Outlook

Real Estate

There’s opportunity in risk management for savvy real estate owners and investors.

Download Report

What to Expect in 2024

Make a Plan

About HUB

What to Expect in 2024

High interest rates and weather-related disasters will continue to have a significant effect on the real estate industry in 2024. Catastrophes and weather events, crime and supply chain issues will evolve, straining profits and resulting in higher insurance rates. Demand has shifted, with less for office space and more for habitational and warehouse space. At the same time, ever-increasing business costs, including insurance, will take a toll on profits.

Explore our key takeaways to protect your profits and drive organizational vitality and resilience...

Rising vacancy rates and insurance premiums threaten profits.

Commercial real estate profits in 2024 will depend on geography, sector and the general economy. Elevated inflation and interest rates are likely to continue, affecting investor confidence in borrowing to buy and build. And leases post-COVID-19 will be renegotiated, downsized or not renewed. While market indicators suggest that interest rates will remain stable, there’s no evidence that they will decline soon. More than six out of 10 Canadian real estate respondents to HUB International’s Outlook Executive Survey say that economic challenges and unpredictability constitute a threat to profits in 2024. That fear is already playing out. Vacancy rates for office space hit 18% in mid-2023. The industrial sector remains a bright spot in commercial real estate, with rent increasing 19.3% year over year, thanks to growth in e-commerce and manufacturing. However, there’s a marked difference between thriving local areas, like Hamilton and Winnipeg, versus overpriced markets such as Toronto and Vancouver. Not only is there a gap in vacancy rates and new building starts for commercial space

between such geographies, but we’ve seen operators compete to buy and improve Class A office space in hot markets, showing faith in their long-term profitability. Insurance costs represent a looming threat to profits. Premiums have risen across the board, even for owners and operators with strong risk management and few claims. As reconstruction costs have increased due to higher labour and materials prices, so have premiums. In catastrophe-prone regions, real estate investors will continue to see increased pressure on rates (but to a lesser degree than in previous years). Those factors mean owners and operators must improve their risk management strategies and insurance coverages to stay profitable. Yet only one-fifth of Canadian real estate respondents to HUB’s survey say they have enough insurance to cover their profit margins, and even fewer (16%) have a “significant loss prevention program” that includes engineering reviews and formal responses to engineering recommendations.

Vitality

Resiliency

Preparedness

Resiliency

Profitability

Personalized benefits will help solve recruiting and retention woes in real estate.

Attracting and retaining employees to manage or maintain properties will remain a challenge in 2024, as workers pursue higher-paying jobs with more flexibility and growth opportunities. The labour shortage will also hit property owners indirectly: As retail and hospitality businesses struggle to find workers, they may not be able to generate enough business to pay rent. Almost one-quarter of Canadian workers changed jobs in 2022, with many seeking better work-life balance and flexibility, increased compensation and a strong company culture. While the turmoil in labour markets has improved somewhat in 2023, turnover remains a significant challenge, with half of Canadian employees planning to look for a job in the first half of 2024. Failing to fully staff property maintenance positions can degrade properties and result in greater exposure to expensive claims and litigation. Having a strong workforce is essential to creating a culture of safety, controlling insurance costs and protecting profits.

Property owners and operators can boost recruitment and retention through personalized benefits informed by data and analytics. This strategy can deliver quality employee experiences (QEX) that create an environment in which employees are more engaged and productive than those without personalized benefits. It’s an area in which the industry has room for improvement: Of Canadian real estate respondents to HUB’s 2024 Outlook Executive Survey, only 36% offer personalized benefits, and just 20% offer lifestyle and alternative insurance options to employees. This also represents a major opportunity for real estate companies to generate a competitive advantage through personalized benefits, such as offering specialty insurance or policies that support extended personal leave to support employee wellbeing.

Preparedness

Vitality

Profitability

For owners and operators, staying resilient will require the right plan and coverage.

More frequent and severe weather events like hurricanes and wildfires, litigation and higher property values that increase replacement costs will continue to pressure rates, particularly in catastrophe-prone areas. Generally, the real estate industry should expect property insurance rates to be stable, with premium hikes largely due to increased valuations. There may be rate reductions for best-in-class properties with good claim histories, but properties with significant losses or in catastrophe zones are unlikely to see any relief and may see much higher rates due to limited capacity for such risks. These increases come on top of rate increases the last five to seven years. Not only are rates increasing, but some investors might find it cost-prohibitive to offload their risk. And property insurance capacity is scarce in areas where real estate owners need it most.

Expect some provinces to respond to insurance capacity challenges through legislation and by beefing up building codes to ensure properties can withstand catastrophes. Also, alternative risk transfer vehicles like tenant default captives, spot captives, deductible aggregates and contingent capital arrangements can help owners and operators cope with rising rates. Catastrophe (CAT) modelling is also becoming essential in real estate resiliency.

Resiliency

Vitality

Profitability

Minding the (risk) gap will enable success in 2024.

Premiums are up, and insurers are facing enormous losses from severe weather events. In addition, the real estate industry will continue to grapple with supply chain woes and the cost of business interruption, as many office and retail spaces still stand empty post-pandemic. In this environment, improved risk management will be mandatory in 2024 — not only to secure affordable insurance, but to help secure real estate businesses’ long-term economic futures. At the most fundamental level, property owners need to make buildings safer, smarter and more resilient to severe weather in 2024. This is particularly true for entities that want to keep insurance costs down through self-insurance or those that take higher deductibles. Real estate owners and operators should prepare to prevent events that lead to property losses, crime or people suffering injuries on their properties. Proper maintenance and site security are essential, baseline risk management measures for any real estate owner.

Sometimes, events lead to losses so extreme that insurance can’t patch all the holes to keep a ship from sinking. Yet just 12% of Canadian real estate entities have an effective risk mitigation strategy, while only 28% align risk mitigation strategies with organizational goals, according to HUB’s Outlook Executive Survey, which points to gaps in preparedness. It’s a telling result indicating that while many organizations may think they are prepared for worst-case scenarios, many aren’t taking the steps to ensure they’re ready when catastrophe hits.

Download Report

Make a Plan

HUB real estate insurance, risk management and employee benefits specialists will work with you to develop a tailored strategy that will protect the bottom line, support the vitality of your workforce and build resiliency for 2024. Here are some initial considerations:

Thoughtfully lean into risk.

High interest rates and a greater number and intensity of catastrophes have increased risk for real estate owners and investors. A higher deductible reduces premiums and improves experience rating, while alternative risk transfer vehicles can lower costs. Discuss with your broker what kind of insurance strategy meets your risk profile and budget.

Make safety a tenet of the organization.

Analyze loss trends.

Increase workforce engagement through benefits.

Analyze loss trends.

Increase workforce engagement through benefits.

Thoughtfully lean into risk.

All buildings – both older and newer – come with risks. Start with regular building maintenance. Make safety a foundation of the organization, with extra training and risk management practices like increased security for all properties. A focus on prevention can save you millions.

Make safety a tenet of the organization.

Understand the root causes of large losses and explain to carriers what you’re doing to prevent future claims. Develop a strategy with HUB to determine the best time and frequency to review alternative markets.

Analyze loss trends.

Thoughtfully lean into risk.

Make safety a tenet of the organization.

Increase workforce engagement through benefits.

Real estate entities have had difficulty attracting and retaining employees, but those with a benefits strategy based on personalization and fostering a quality employee experience (QEX) will boost engagement, have an advantage in recruiting and retention and lower risk as well. Work with your broker to identify the right data for a personalized benefits strategy.

Increase workforce engagement through benefits.

Thoughtfully lean into risk.

Make safety a tenet of the organization.

Analyze loss trends.

Real Estate

Download Report

Download our 2024 Real Estate Outlook and Insurance Market Rate Report to see what to expect in the coming year.

Be Prepared

Learn About HUB

Meet the Experts

Practice Leader

Real Estate Practice

James Stuart

Linkedin Profile

Vanessa Geddes

Real Estate Practice

Risk Advisor

Linkedin Profile

Gaelan Porter

Real Estate Practice

Expert

Linkedin Profile

Firstname Lastname

Industry Practice

Job Title of Person

Linkedin Profile

Firstname Lastname

Industry Practice

Job Title of Person

Linkedin Profile

Firstname Lastname

Industry Practice

Job Title of Person

HUB Real Estate

When you partner with HUB, you’re at the centre of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB real estate advisor. We’re here to help.

About Us

$2.32B

in commercial insurance premium brokered by HUB

47,200

real estate clients

117,000

insurance policies managed

Stay up to date

Subscribe to receive real estate insights and event invitations throughout 2024.

Profitability

Vitality

Resiliency

Preparedness

Be transparent with your broker.

Let your broker know what changes you’ve made to the business, so there are no surprises at renewal. Review exposures and insurance needs at least 90 days prior to policy renewal, so your broker can identify the best options.

Analyze loss trends.

Make safety a tenet of the organization.

Thoughtfully lean into risk.

Increase workforce engagement through benefits.

Be transparent with your broker.

1. BNN Bloomberg, “Bank of Canada Seen Keeping Rates Steady as Growth Picks Up,” September 26, 2023.

Vacancy rates for office space hit 18% in mid-2023.

The industrial sector remains a bright spot in commercial real estate, with rent increasing 19.3% year over year.

One of HUB’s large real estate clients leveraged CAT modeling to show that the company was paying too much for the wrong risks. As a result, the organization reduced its loss limit by USD $100 million, providing significant savings with an acceptable level of risk. In addition, the company identified significant exposures that affected the company’s long-term acquisition strategy.

In addition, multifactor authentication (MFA) protocols and endpoint detection and recovery (EDR) will reduce the risks of cybercrime. And by helping renters secure their supply chains and implement business interruption plans, owners and operators can minimize the threat of lost rents because their tenants can’t operate their businesses.

offer personalized benefits

offer lifestyle and alternative insurance options

Of Canadian real estate respondents to HUB’s 2024 Outlook Executive Survey, only

3. CBRE, “Canada Industrial Figures Q2 2023,” July 4, 2023.

4. Financial Post, “Posthaste: Almost a quarter of Canadians changed jobs amid the ‘Great Resignation’,” July 29, 2022.

6. National Apartment Association, “The Big Quit: Retaining and Attracting Talent Post-Pandemic,” August 1, 2022.

5. Robert Half, “Half of Canadian Workers Plan to Look for a New Position in the New Year,” accessed October 5, 2023.

7. The Vancouver Sun, “Extreme weather risk changing Canada’s insurance industry, raising costs,” August 4, 2023.

8. Insurance Bureau of Canada, “Severe Weather in 2022 Caused $3.1 Billion in Insured Damage — making it the 3rd Worst Year for Insured Damage in Canadian History,” January 18, 2023.

REAL-CAE

Linkedin Profile

Sarah Thompson

Real Estate Practice

Canadian Practice Leader

Linkedin Profile

Carol Mills

Real Estate Practice

Practice Leader Emeritus

Insurance can't always patch all the holes to keep a ship from sinking, but only 12% of Canadian real estate respondents to HUB's Outlook Executive Survey have an effective risk mitigation strategy.

Transportation

Entertainment & Sports

Real Estate

Nonprofit

Hospitality

Healthcare

Private Equity

Education

Construction

Cannabis

Agribusiness

Industries

Private Client

Employee Benefits & Retirement

North American Outlook

Sitemap

Terms & Conditions

Privacy Statement

Keep pace with the latest trends.

Stay In the Know

Learn more about us. Visit hubinternational.com

Transportation

Real Estate

Private Equity

Nonprofit

Hospitality

Healthcare

Entertainment & Sports

Education

Construction

Cannabis

Agribusiness

Private Client

Employee Benefits & Retirement

Industries

CA | EN

CA | FR

US | EN

CA | EN

Industries

2. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.