Real Estate
Insurance rates are likely to stabilize — and real estate operations with strong risk management will capitalize.
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What to Expect in 2025
Demand and interest rates will have a major impact on profitability. While real estate insurance rates are finally stabilizing, natural catastrophes and litigation still pose significant risks. Real estate owners and operators will also need to bring their compensation and benefits packages more in line with employees’ wants and needs. Industry players must remain vigilant and adapt to effectively manage and respond to persistent risks.
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1
Profitability
Rising costs and vacancy rates will challenge profits, but lower interest rates and insurance stabilization will provide relief.
2
Vitality
Personalized benefits will help recruiting and retention in a tight labor market.
3
Resiliency
Stabilizing insurance rates will provide welcome relief to a sector that’s been hit hard with premium increases.
4
Preparedness
Getting ready for emerging risks with a sound risk management strategy.
Rising costs and vacancy rates will challenge profits, but lower interest rates and insurance stabilization will provide relief.
1 | Profitability
$1 trillion
in commercial real estate loans are expected to mature in 2025.1
Personalized benefits will help recruiting and retention in a tight labor market.
2 | Vitality
Commercial property rates are expected to rise no more than 5%, and some insureds could see decreases of up to 10%.
Stabilizing insurance rates will provide welcome relief to a sector that’s been hit hard with premium increases.
3 | Resiliency
The industry has seen major challenges to profitability, as it has dealt with rising operating expenses related to construction, labor and insurance, high borrowing costs and increasing vacancy rates. But 2025 could see a turnaround.
On the surface, profitability challenges remain. In the second quarter of 2024, office vacancies surpassed 20% for the first time.2 Even with increased demand in many geographies, misplaced supply led to higher vacancy rates in the industrial sector, which rose 30 basis points from the first to second quarters of 2024 to 5.6%.3
Real estate investors and owners are also feeling pressure from $950 billion in commercial real estate mortgages set to mature in 2024, with that number expected to grow to nearly $1 trillion in 2025.4 The September 2024 Federal Reserve action to cut interest rates 50 basis points5 may ease concerns on refinancing those loans.
In addition, the likelihood of additional interest rate cuts6 provides another beacon of hope. As inflation eases toward the end of the year and the cost of borrowing comes down, so should loan and business expenses. Real estate investors will see renewed demand.
The cost of insuring commercial real estate remains a challenge, particularly in areas where there is a high frequency of
convective storms, wildfires and other disasters. More than six out of 10 real estate industry respondents to the HUB International 2025 Outlook Executive Survey7 say increased expenditures, such as insurance, are the biggest threat to their profits in 2025.
However, capacity is slowly returning to the property insurance marketplace, bringing much-needed competition from insurers for real estate owners and operators with risks that are well-maintained and with strong risk management strategies to protect assets.
To take advantage of rate stabilization and boost profits, real estate owners and operators should evaluate exposures and determine with a best-in-class broker how to get coverage that’s affordable and can form the proper backstop for a risk management program. Real estate operations that do so will be poised to take advantage of new growth opportunities in 2025.
Case Study
A HUB client mistakenly miscalculated its business income, resulting in higher insurance rates. Using data analytics and industry expertise, HUB helped the client properly recalculate its income and reduced the property’s total insured value (TIV) by $800 million, resulting in about $2.5 million in premium savings.
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The real estate sector hasn’t been immune from the relentless labor shortages that have plagued most industries. The issue ranks as one of the biggest concerns for commercial real estate companies, thanks to workers pursuing higher-paying jobs that can be done remotely.8
The number of job openings in the professional and business sector, which includes positions responsible for property maintenance such as landscapers and cleaners, are consistently among the highest across all industries.9 Lack of staff, security and maintenance erodes properties, making them magnets for crime, putting them at a higher risk of damage and resulting in increased property insurance rates.
So it’s not surprising that 77% of real estate industry respondents to the HUB survey listed productivity as an HR concern that needs addressing, with 62% saying recruitment will be a key priority in 2025.
For tenants, it’s an issue as well: Leisure, hospitality, retail and food service businesses have long struggled to find employees to fill open positions, making it difficult for businesses to properly
operate and pay their leases. Short-staffed tenants are also an increased safety exposure for property owners.
As companies keep trying to lure employees back into the office, building owners must invest in improving their properties to make them a more desirable place for workers. But finding construction workers to build new properties, repurpose existing buildings, or make needed repairs to maintain property values or attract new tenants has been an ongoing challenge for real estate investors and owners.
Real estate investors and owners who offer flexibility, a safe working environment and robust benefits will be better positioned to recruit and retain a strong workforce.
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.
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Real estate owners and operators could finally see some insurance rate relief in 2025. Hard market conditions are expected to ease in 2025 thanks to insurers’ efforts to restore profitability through higher premiums and underwriting discipline.10
There is now more competition for property insurance premiums, which have had years of double-digit rate increases on renewal. Commercial property rates are expected to rise 5% at a maximum, and some insureds could see decreases of up to 10%, depending on the property and the location.
Rate increases for general liability insurance, as well as umbrella and excess coverage, will be generally flat or rising up to 10% for insureds with a significant loss history.
Residential real estate property premiums will fall or rise modestly within 10% of expiring, and catastrophic perils coverage is expected to stabilize. However, wind-, wildfire- and earthquake-exposed properties in particular may see hefty increases. Insurers are focused on valuations in determining premiums.
More frequent small to medium storm events caused many claims in the first half of 2024. These severe thunderstorms or convective storms totaled $42 billion in insured losses, the second costliest on record and 87% higher than the 10-year average.11
Insurers will continue to closely evaluate properties for risk and underwrite those built or modified to withstand natural disasters. Real estate owners and operators who have delayed building repairs or improvements need to make their properties resilient and implement strong risk management practices to secure the best rates and policy conditions.
Real estate owners and operators can get the most out of a stabilizing market by working with an insurance broker who has expertise in real estate to formulate a proper risk management plan and a smart insurance strategy. They should keep valuations current and properties well-maintained and take all available measures to reduce the threat of damage to the property.
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In 2025, real estate owners and operators will need to prepare for risks as varied as intense weather brought about by climate change, mushrooming nuclear verdicts, changing regulations, and security and safety.
A troubling trend has been the proliferation of third-party litigation financing, in which investors front the cost of a lawsuit in exchange for a share of the settlement. Investors committed $3.2 billion to third-party litigation in 202212 and that number has been growing since.
Third-party litigation financing is often behind Americans with Disabilities Act (ADA) lawsuits against real estate firms and those managing public or commercial properties. They are often considered easy targets because of the number of compliance standards they must meet.13
In these suits, claimants allege the properties are in violation of the accessibility standards of the ADA, with litigation often filed before the property owner has a chance to rectify the issue. To protect against such lawsuits, real estate companies need to mitigate the risk by ensuring they are up to date on regulatory requirements.
Real estate owners and operators must also be aware of emerging cybersecurity threats and potential criminal activity that could result in harm to their properties or tenants — or lead to expensive litigation.
Such preparation is not an exercise in futility but is essential for the long-term health of the enterprise. However, according to HUB’s 2025 Outlook Executive Survey, only 55% of real estate industry respondents say they have an enterprise risk management (ERM) assessment process to address emerging risks.
Of those that do, just 37% say that disaster planning is a core element of their ERM assessment, 35% incorporate disaster planning into ERM and less than 30% report safety reviews are part of their risk management assessment.
Collaborating with an insurance broker with deep industry expertise in real estate is the first step toward maintaining and improving preparation for unpredictable risks and securing proper coverage.
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Getting ready for emerging risks with a sound risk management strategy.
4 | Preparedness
Navigating Your Next Steps
HUB real estate specialists and financial advisors will work with you to develop a tailored strategy that protects the bottom line, supports your workforce and builds resiliency for 2025.
1
Thoughtfully lean into risk.
An uncertain economic environment, a greater number and intensity of catastrophes and nuclear verdicts 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.
2
Nuclear verdicts against real estate companies have become common. Make safety a foundation of the organization, with extra training and risk management practices like increased security for all properties and to-the-letter compliance with regulations. A focus on prevention can save you millions.
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.
3
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 benefits advisor to identify the right data for a personalized benefits strategy.
Increase workforce engagement through benefits.
4
Be Prepared
Download our 2025 Real Estate Outlook and Insurance Market Rate Report to see what to expect in the coming year.
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Meet the Experts
North American Practice Leader, CSO
Real Estate Practice
James Stuart
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Risk Advisor
Michael McBride
Real Estate Practice
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Expert
Grant Allen
Real Estate Practice
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HUB Real Estate
When you partner with us, you’re at the center of a vast network of experts who will help you reach your goals. 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 insurance specialist.
About Us
$2.6B
in commercial insurance premium brokered by HUB
49,200
real estate clients
122,000
insurance policies managed
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2 | Vitality
3 | Resiliency
4 | Preparedness
4 | Preparedness
3 | Resiliency
1 | Profitability
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1 | Profitability
2 | Vitality
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3 | Resiliency
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3. CBRE, “Industrial Vacancy Rate Rises Despite Increased Demand, July 30, 2024.
4. S&P Global, “Commercial real estate maturity wall $950B in 2024, peaks in 2027,” September 5, 2024.
5. AP, “Federal Reserve signals end to inflation fight with a sizable half-point rate cut,” September 18, 2024.
6. MarketWatch, “The Fed is likely to cut interest rates until next summer as the threat of inflation fades,” September 15, 2024.
7. 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.
8. The Counselors of Real Estate, “Where Have All the Workers Gone? The Labor Shortage,” December 11, 2023.
9. U.S. Chamber of Commerce, “Understanding America’s Labor Shortage: The Most Impacted Industries,” August 28, 2024.
10. Swiss Re Institute, “World insurance: strengthening global resilience with a new lease on life,” July 16, 2024.
11. Swiss Re, Severe thunderstorms drive insured losses to USD 60 billion in first half of 2024, Swiss Re Institute estimates August 7, 2024.
12. Munich Re, “Legal system abuse inflates costs for all,” March 25, 2024.
13. National Association of Realtors, “Commercial / Americans with Disabilities Act (ADA) Lawsuit Reform,” accessed September 25, 2024.
1. S&P Global, “Commercial real estate maturity wall $950B in 2024, peaks in 2027,” September 5, 2024.
2. Moody’s, “Q2 2024 Preliminary Trend Announcement,” July 2, 2024.
REAL
77%
of real estate industry execs say productivity needs addressing in 2025.
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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.
Be transparent with your broker.
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55%
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Keep pace with the latest trends.
Stay in the Know
Industry Outlooks
Retirement
Private Client
Personal Insurance Marketplace
Employee Benefits
Product Outlooks
Transportation
Real Estate
Nonprofit
Hospitality
Healthcare
Financial Institutions
Entertainment & Sports
Education
Construction
Cannabis
Agribusiness
North American Outlook
Learn more about us. Visit hubinternational.com
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.
Be transparent with your broker.
5