According to a 2020 survey by U.S. Energy Information Administration, the number of commercial buildings increased by 6% in the last 8 years. In 2022, 115 billion US dollars were spent on commercial real estate construction, representing a significant rebound from the drop during the pandemic.
Commercial buildings remained appealing for a variety of reasons. This segment has seen it all, be it changing norms, green building initiatives, or financial ups and downs. Natural disasters, widespread acceptance of work-from-home opportunities, and a variety of other factors have all had an impact. Despite that, the available rental space in the US is as low as 4%, showing an increasing requirement amidst all the chaos.
Many interesting trends are emerging in the space that should be of interest to commercial building owners. Read on if you are one.
Government regulations, technologies, and more
Government regulations have quite a significant impact on commercial buildings. From imposing environment-related rules to taxation, the government takes major steps in this direction. For example, strict regulations exist on using specific chemicals, or how much a tenant must legally pay. As the world moves toward a better and cleaner society, the government will continue to impose strict regulations on energy management techniques and what improvements can be made to reduce carbon footprints in 2024. This can include using renewable energy to obtain a subsidy or reusing water used in business operations.
Technologies are altering commercial building operations. However, cybercrime will remain a concern in the digital world with increasing online frauds and scams. 2024 will be the year of staying informed and securing the business with the appropriate cyber insurance policies for all-around protection.
Better business interruption coverage
Business interruption insurance could become one of the most important insurance policies in 2024. A Weforum report suggests that around 48% of small businesses closed in San Francisco and around 34% in the nation overall during the pandemic era. Economic uncertainties persist and it’s becoming harder to ensure success. On top of that, with many billion-dollar disasters happening in different parts of the nation, many buildings and places of work had to shut down or cease temporarily. According to a survey, one out of every ten small business owners suffered significant losses as a result of natural disasters.
This demonstrates the need for greater investment and emphasis on business interruption coverage. Small businesses should look to invest in business interruption coverage to secure regular expenses such as salaries and debts in the event of natural disasters or other unforeseen situations that force operations to stop.
Tackling the work-from-home scenario
Work from home is here to stay and it can deeply impact commercial building owners in one way or the other. According to Forbes, around 12.7% of full-time employees in the United States now work remotely full-time. When it comes to hybrid models, 28.2% of employees are in such set-ups. The future of the workplace is however ready to change again. Many reports indicate that business owners are calling employees back to offices with varying degrees of success. According to npr.org, major corporations have begun requiring employees to participate in hybrid work systems or lose their jobs. The emergence of hybrid-ready workplaces will impact commercial real estate in many ways.
According to a report by Deloitte, office property valuations have dropped by around 4.5% globally, and North America has taken a dip of around 5.9%. However, the report also suggests that new construction is ready to accommodate the hybrid workforce. The trend is likely to take shape in 2024 when a larger part of the workforce participates in hybrid workspaces. According to a CBRE survey, 24% of respondents believe that office space utilization will improve in the first half of 2024, while 6% believe that it will take until the end of 2024 or even beyond. Making commercial buildings ready for a workforce accustomed to working from home will be an interesting trend to watch. This would be particularly appealing to commercial property owners who rent out their properties to businesses for operations.
Portfolio analysis and risk mitigation of prime importance
In recent times, portfolio analysis and risk mitigation have gained a lot of traction because of the unprecedented circumstances that people had to face since 2020. We live in highly uncertain times. To bring some order to this chaos, there have been numerous technological advancements in portfolio analysis and property assessments. This includes using drones to inspect properties and artificial intelligence for underwriting to improve the process’s accuracy and efficiency. Moving forward, a growing number of building owners will adopt this significantly.
Property performance metric checks, market conditions, financial performance of the property, demographic and conditional factors, legal compliance, and so on are all part of regular portfolio analysis and risk mitigation practices. A comprehensive portfolio analysis can be provided based on all these factors. In 2024, the trend is expected to spread.
In a Nutshell
Commercial building owners must consider many factors to stay ahead of the changing market, be it insurance, safety compliance, or legal breakthroughs. 2024 will surely be an interesting year for the sector with much set to change. Technology, energy management, and strict government compliance will all have an impact on the industry, for better or just for its good.
Commercial building owners would do well to understand what is coming their way and how to navigate that landscape. Come and talk to us if you want to know whether your commercial property will be affected by the turbulence or not. Gonzalez Insurance can help you ensure your commercial building stays protected through 2024 and beyond.