The market has settled. The risk hasn’t.
Nick, ACII Chartered Insurer and Branch Manager, London Real Estate Branch, Covéa Insurance.
I’ve been close to the real estate market long enough to know that when things look like they’ve calmed down, that is usually the moment to look a bit harder.
Commercial property does feel steadier than it did a couple of years ago. Most of the repricing has worked its way through, investment is moving again, and there’s more confidence about than there was. Lovely. But I’d be careful about reading that as things going back to how they were.
Buildings are changing hands more often, changing use more often, and sitting empty for longer between one life and the next. The market around the asset may have calmed down. The risk inside it hasn’t. That is the bit brokers and underwriters cannot afford to miss.
We’re 100% intermediated, so every property policy we write comes through a broker. That isn’t a marketing line. It is just how we work. So, from where I’m sitting, here are the pressure points worth keeping an eye on.
Stability at the top, movement underneath
Investment activity has held up, but it’s selective. Buyers are looking hard at asset quality, income and what the building will still be worth in ten years. Financing costs and occupier demand are shaping a lot of those decisions.
All of that changes the risk. A sale, a refurbishment, a redevelopment, a new tenant or a change of use can shift a property’s profile considerably, and often none of it reaches the policy until renewal comes round.
Understanding the building is only half the job. Understanding what the owner intends to do with it is the other half.
Empty doesn’t mean risk-free
A vacant building is a completely different proposition to an occupied one. Escape of water, malicious damage and fire all become more likely, and problems go unnoticed for far longer when there’s nobody walking the floors.
And there’s more empty space about than there was. RICS reported a net balance of +20% of surveyors seeing availability rise in the second quarter of this year, across offices, retail and industrial alike. Plenty of that is property sitting idle while an owner works out whether to refurbish, redevelop or sell. That can be a few weeks. It can just as easily be a year. Inspections, security and maintenance matter enormously in that window, and they’re the first things to slip when a building is between uses.
So the question isn’t really whether the property is occupied. It’s what’s happening to it, and what happens to it next.
The number that decides everything
The scale of it is worse than most people assume. Of more than 43,000 rebuild cost assessments carried out across the UK last year, 71% of commercial properties came back underinsured, and those that were are covered on average for just 67% of what it would actually cost to rebuild them. That is not a bit out. That is not even “close enough”. That is the difference between a building going back up and an owner getting a very sharp lesson in what the average clause does.
And it shows up where it hurts. The Chartered Institute of Loss Adjusters reckons underinsurance is present on more than 40% of claims, typically by 35% to 45%. The reason it keeps happening is that index-linking on its own can’t keep pace. BCIS expects building costs to rise another 13.1% over the next five years, so a sum insured that looked about right a few years ago quietly stops being right while everyone assumes the policy is looking after itself.
A reinstatement review isn’t an administrative job. It’s the thing that decides whether the settlement actually rebuilds the building. If one figure on the schedule deserves half an hour of somebody’s time, it’s that one.
Why any of this matters to us
Worth saying where we sit in all this. There is no direct arm here and never has been. If a property owner ends up underinsured, or an empty building goes wrong, that lands on your desk first and ours second. Which is roughly the right way round, and it’s why we take it seriously.
SME Experts isn’t a strapline. It’s a decision about what we’re prepared to be genuinely good at, and in property that shows up in fairly ordinary ways. Underwriters who want to talk about the building rather than just the postcode. Someone who understands why a change of tenant matters. A straight answer early on if a risk isn’t for us, rather than three weeks of tumbleweed.
We don’t always manage it. When we don’t, I’d sooner hear about it than read about it later. Partner of choice is the ambition, but it isn’t a claim you get to make about yourself. It’s one brokers either make about you or they don’t.
Weather is a property problem now
Flood, storm and water damage are the obvious ones, and they’re not going anywhere. Escape of water alone costs the industry around £1.8 million a day, and an empty building is where a slow leak does its worst work. But weather doesn’t always show up as a dramatic loss. More often it’s disruption: tenants who can’t get in, a car park that floods twice a winter, maintenance costs creeping up year after year.
Which is why resilience has become part of the conversation rather than a footnote to it. Flood protection, fire protection, leak detection, maintenance, security. None of it is glamorous, and all of it changes how a risk looks to an underwriter.
Buildings don’t stay what they were
An office becomes flats. A warehouse gets carved up. Retail space is repurposed into something nobody had thought of five years ago. Plenty of buildings are going through significant refurbishment simply to hit energy efficiency standards.
Technology is creating new property types altogether. Data centres are the obvious example, growing fast on the back of AI, and they bring a scale, a power requirement and a concentration of value that the market is still working out how to handle.
Most portfolios won’t contain anything like that. But it makes the point. What a building is used for today, and what it might be used for next year, is the thing worth knowing.
What good broking looks like here
Almost all of it comes back to knowing what the owner is planning. What’s the building being used for now? Who’s in it? Is any of it empty, or about to be? When was the reinstatement value last looked at properly, and what’s happening to the place over the next twelve months?
None of that is complicated. It just takes someone bothering to ask before the building changes rather than after, and it’s the difference between a policy that fits and one that merely exists.
The year ahead
I think the property market stays steady into 2027, and I think the risks underneath it carry on moving regardless. Ownership will keep changing, buildings will keep being repurposed, and the weather will keep doing what it’s been doing.
Good property underwriting was never really about the building itself. It’s about what goes on inside it, what goes on around it, and what somebody intends to do with it next. Miss that and you’re not insuring the building in front of you. You’re insuring a photograph of it, and hoping nobody notices it has changed.
