In 2023, commercial property insurance premiums spiked by 20%+. In some coastal markets, they doubled.
The good news? In late 2024 and early 2025, the rate of increase slowed to 3-6%. Some reports even show a slight softening (< -1%).
The bad news? The new price is the floor. We are never going back to 2019 premiums. For landlords on Gross Leases (where the landlord pays insurance), this is an NOI killer. A $5,000 increase in premiums destroys $71,000 in asset value (at a 7% cap rate).
The "Pass-Through" Imperative
This is why we obsess over Triple Net (NNN) lease structures.
Gross Lease
Landlord Pays Risk
Insurance goes up $2k. Your cashflow goes down $2k. You take 100% of the volatility.
NNN Lease
Tenant Pays Risk
Insurance goes up $2k. The tenant receives a bill for the difference. Your NOI remains protected.
The Southeast Context
Upstate SC is insulated from the worst of the coastal wind risk (Hurricanes), but we are not immune to the "Reinsurance Treaty" ripple effects. Global reinsurance markets have tightened, affecting pricing everywhere.
Our strategy is to buy assets that are "Insurable by Design":
- Masonry & Metal: Avoiding wood-frame structures.
- Inland Location: 200+ miles from the coast.
- Tenant Use: avoiding high-hazard manufacturing that spikes premiums.
