When you’re developing or managing commercial or real estate, a significant source of rising costs is in insurance rates. Consider these three areas to help manage costs.
1. Consider weather factors related to location
Owner-occupiers haven’t always considered geography and geology, but they are now, says Ted Konigsberg, SIOR, president of Infinity Commercial Real Estate in Miami. Where your property is located in relation to severe weather is a significant risk factor. “Is the property located in a flood zone? Is there a wind corridor? Look at the history of the area. It even goes down to looking at your neighbors and things like vegetation.”
2. Watch those tenants
Another major source of higher insurance costs involves the tenants or owner-occupants themselves, says Arlon Brown, SIOR, director-brokerage, commercial real estate adviser with NAI/Parsons Commercial Group in Boston. “Know what industry they’re in. Are they good managers of their own operation? It doesn’t matter if they work with widgets or chemicals. Do they have proper disposal and adhere to all the rules and regulations?”
3. Know what’s in the lease
You can do a lot to mitigate insurance risks by structuring your lease carefully, Konigsberg says. “Contemplate all eventualities.” For example, the landlord has the right to declare default for unsafe conditions, he says. The lease should also say the tenant must provide annual certification of insurance and 30 days’ notice of cancellation. “Tenants can’t be allowed to go uninsured, period, and you deserve notification,” he says.
Konigsberg says all these factors come down to two actions:
- The landlord should make sure the lease contemplates all potential liabilities and remedies.
- Manage your property. Just because the tenant pays rent doesn’t mean you shouldn’t walk through a couple of times a year and be 100% sure the insurance is current.
Adapted from “The Risk Beneath the Lease,” written by Steve Lewis and published in the Fall 2025 edition of SIOR Report.