Hybrid work will reshape the demand for US office space in 2025. Explore property owner challenges, home office liability, insurance gaps, & why robust commercial property coverage is non-negotiable. Protect your assets today!

The American workplace has undergone a seismic shift, and the tremors are profoundly reshaping the landscape for office property owners. As we navigate 2025, the hybrid work model – a blend of remote and in-office work – isn’t just a pandemic relic; it’s the entrenched reality. According to Gallup’s most recent findings, half of all full-time employees in the US hold jobs that can be done remotely. Notably, 60% of these workers are keen on having a hybrid work setup, while around 33% favor working entirely from home. Less than 10% desire full-time on-site presence. This fundamental change in employee preference and employer strategy presents unique challenges and necessitates a re-evaluation of risk management, particularly concerning insurance, for office building owners across the USA.

The Hybrid Headache: Vacancy, Value, and Valuation Volatility

The most immediate impact for owners is reduced demand for traditional office space. With employees in the office only 2-3 days a week on average, companies are actively rightsizing their footprints. This leads to:

• Increased Vacancy Rates: More companies are leasing less space, subleasing unused portions, or simply not renewing leases at previous scales. This directly pressures rental income – the lifeblood of commercial real estate investment.
• Decreasing Values of Property: Decreased occupancy and rental rates lead to reductions in property valuations. This is especially ominous for the impending financial pressure: more than $1 trillion of commercial real estate loans are scheduled to mature in 2025. Investors will have to recapitalize these loans in a very unfavorable environment with a reduction in asset value.
• Valuation Inaccuracies: Accurately valuing office properties in this volatile environment is incredibly difficult. Traditional models are disrupted. According to industry specialists such as Kroll, it’s shocking to find that 90% of evaluated properties are actually underinsured. Even more concerning, 68% of buildings valued between 2020-2021 were underinsured by 25% or more. Inaccurate valuations don’t just affect loans; they critically undermine the foundation of adequate insurance coverage.

Beyond Empty Desks: The Liability Labyrinth of Home Offices

Hybrid work doesn’t just move desks; it potentially shifts liability. A critical question emerges for employers (and indirectly, for the building owners who lease to them): Are employers liable for employees working from home?

The answer is nuanced but increasingly leaning towards “yes” in many scenarios:

• Workers’ Compensation: Under workers’ compensation law, broadly speaking, any time an employee is injured while performing job duties at home, it is likely compensable, just as work injuries at the office. Therefore, it is paramount that employers have standing clear policies indicating hours of work and specific tasks.
• Premises Liability (Gray Area): If an employee is injured at home because of such equipment or tasks (e.g., tripping over a laptop cord provided by the employer), or if a business visitor is injured during a home meeting, some liability could apply to the employer. Courts have yet to provide clear guidelines on this.
• Employer Obligation: OSHA encourages employers to make sure that any home workspace is free of recognized hazards that might cause injury, but enforcement in private residences is quite difficult. If workers were severely injured due to negligent provision of safe equipment or the absence of training, the employers could be in trouble.

Why Homeowners Insurance is NOT the Safety Net (For Employers or Owners)

This is where insurance becomes paramount, and a common misconception arises:

• The Employee’s Homeowners Policy: An employee’s standard homeowners or renters insurance policy is primarily designed for personal activities and possessions. Generally, it doesn’t cover business-related activities or equipment owned by the business. If a fire destroys the employee’s home office and the company laptop, the homeowners’ policy might cover the structure damage but likely won’t cover the business equipment or any liability arising from business operations conducted there.
• The Gap for Employers: Relying on an employee’s homeowners policy leaves the employer exposed. If business equipment is damaged or stolen from the home, or if a liability claim arises from the homework activity, the employer could face significant uncovered losses.
• The Employer’s Commercial Policy Imperative: Employers must extend their commercial property insurance to explicitly cover company-owned equipment used by employees off-site, including in their homes. This “floater” or off-premises coverage is essential. Similarly, their commercial general liability (CGL) policy needs careful review to understand coverage for potential home office-related incidents. Employers absolutely cannot assume an employee’s homeowners policy provides adequate protection for business assets or liabilities.

Why Robust Commercial Property Insurance is Non-Negotiable for Office Owners

While employers grapple with their liability, commercial building owners face their own unique and amplified risks in the hybrid era, making comprehensive and accurately valued commercial property insurance absolutely critical:

1. Underinsurance is Rampant: As the Kroll study shockingly revealed, 90% underinsurance is the norm, not the exception. With replacement costs skyrocketing due to inflation, supply chain issues, and updated building codes, valuations updated only every 3-5 years are almost guaranteed to be woefully inadequate.
2. Valuation Volatility: The hybrid-driven decline in values complicates insurance-to-value calculations. Owners and their insurers must work diligently with expert appraisers who understand the current market dynamics to avoid dangerous underinsurance or inefficient over-insurance.
3. Increased Physical Risk: Lower occupancy can sometimes correlate with increased risk – less frequent maintenance checks, slower detection of issues like leaks or electrical problems, and potentially higher susceptibility to vandalism or theft.
4. Beyond Bricks and Mortar – Loss of Income: This is really important because hybrid work is already having a negative impact on income. If an event covered by an insurance policy (fire, flood, or significant damage) forces tenants out of the building even temporarily, the owner is left with repair in both costs and loss of rental income. Business Interruption (BI) or Loss of Rent coverage within a commercial property policy is essential to replace this lost income during the restoration period.
5. Specialized Perils: Flood and earthquake perils are standard exclusions from most policies. Given the impacts of climate change, flood (usually through some form of NFIP or private surplus lines) and earthquake coverage is a priority now for many areas.
6. Liability Lingers: There are still huge liability risks that owners face on their properties – slips and falls in common areas, injuring maintenance workers, allegations of not having adequate security, and even tenant discrimination claims. Nevertheless, strong commercial general liability (CGL) coverage still underpins everything.

Conclusion

A commercial property owner, especially in the hybrid era, has the potential for remunerative returns but with considerable evolving risks. Vacancy pressures, loan maturities, valuation uncertainties, and complicated liability landscapes demand a sophisticated approach. Underinsurance is a silent killer, and standard policies often leave dangerous gaps.

Don’t navigate these complex risks alone. At Gonzalez & Company, we specialize in protecting commercial property owners like you. We understand the unique challenges posed by the shift to hybrid work and provide tailored solutions offering critical benefits:

• Combat Underinsurance: Ensure full rebuild coverage.
• Guarantee Income: Loss of Rent protection.
• Shield from Liability: Premises & discrimination coverage.
• Cover Special Perils: Flood & earthquake options.
• Manage Tenant Risk: Lease guidance & liability buffers.

We work with you to understand your specific property, tenants, and goals, crafting insurance solutions that provide true peace of mind. Protect your investment and your future against the realities of 2025.

Contact Gonzalez & Company today for a comprehensive review of your commercial property coverage.

FAQs

1. How is hybrid work impacting office property owners in 2025?

It’s leading to increased vacancies, decreasing property values, and making accurate valuations difficult due to reduced demand for traditional office space.

2. Why isn’t an employee’s homeowners insurance enough for home office risks?

Home insurance is not at all business insurance. It’s meant to cover your house, personal belongings, and personal activities. Usually, standard home insurance policies don’t include coverage for business tasks, business-owned equipment, or any legal responsibility from working at home.

3. What should I do to protect my commercial property in this hybrid work environment?

Simply contact us for a comprehensive review of your commercial property coverage to ensure full protection against evolving risks, underinsurance, and potential liabilities.