NYC’s Commercial Real Estate Boom Drives Business Insurance Costs to Record Highs in 2024

New York City’s commercial real estate market has experienced a remarkable transformation in 2024, with trophy Class A rents in Midtown climbing to around $120–$125 per square foot and the city’s office market outperforming other major U.S. office markets. However, this resurgence comes with an unexpected consequence: business insurance premiums are soaring to unprecedented levels, creating new financial challenges for property owners and businesses across the five boroughs.

The Commercial Real Estate Recovery Fuels Insurance Premium Increases

The relationship between rising property values and insurance costs has become increasingly evident throughout 2024. Office valuations fell 50%, especially impacting key cities like New York, yet the market has shown strong signs of recovery. Office usage in Manhattan reached 79.9% in January 2025 – well above the 66.9% average for major and secondary US cities, signaling a robust return to pre-pandemic activity levels.

This recovery has directly impacted insurance pricing. The 7% average increase in Q4 compared to 8.1% in Q3, is the 25th straight quarter with increases for commercial lines insurance. More specifically for property coverage, commercial property increases of 11.8% during Q4 continued a trend of moderation throughout 2023. Increases were 20.4% in Q1, 18.3% in Q2, and 17.1% in Q3.

New York’s Unique Insurance Challenge

New York City faces particularly acute insurance cost pressures. For apartment buildings with at least 50 units, average insurance premiums more than doubled in Brooklyn and rose by over 50% in Manhattan and Queens between 2020 and 2023. The situation has become so severe that policy increases ranging from 10% to 300% upon renewal, depending on claim history are now commonplace across the city’s commercial real estate portfolio.

The driving factors behind these increases are multifaceted. Experts predict a 5% to 25% increase in commercial property insurance premiums in 2024, influenced by an intense natural disaster season, inflationary pressures and a volatile property valuation landscape. Additionally, building material costs show no signs of decelerating. Notably, there was a substantial increase in building material prices in 2023, exceeding 10%, particularly in wood and steel expenses (over 15%).

The Impact on Business Operations

For businesses operating in NYC’s commercial real estate market, these insurance increases represent a significant operational challenge. For many business owners, the increase in insurance rates can result in higher operational costs, leading to budget constraints. As premiums rise, businesses may be forced to reconsider their coverage options, potentially opting for less comprehensive policies that expose them to greater risk.

The ripple effects extend beyond individual businesses to the broader real estate market. The rise in commercial property insurance rates can directly influence the real estate market in New York. As insurance costs increase, property owners may face difficulty in maintaining occupancy rates, and investors may hesitate to enter the market due to the higher risk associated with increased insurance premiums.

Expert Guidance for Navigating Rising Costs

For businesses seeking reliable insurance coverage in this challenging environment, working with experienced local brokers has become essential. Companies like Max J. Pollack & Sons Insurance, which has been serving the New York Metropolitan community for over 75 years from their office in Park Slope, Brooklyn, offer the deep market knowledge necessary to navigate these complex conditions.

The value of local expertise cannot be overstated when securing commercial insurance nyc coverage. The ongoing success of our company is due to a combination of extensive insurance industry knowledge, coupled with something you don’t see too often in today’s world — old-fashioned, personalized attention to our customers’ needs, explains the approach that has kept family-owned agencies competitive in an increasingly complex market.

Strategies for Managing Insurance Costs

Industry experts recommend several approaches for businesses facing these rising costs. Insurance carriers are more focused on due diligence, so owners need to be prepared for a larger premium jump if their insurance is based on outdated values. In the past, some owners deliberately underestimated replacement costs to save money on premiums, but insurance companies are catching up now and are focused on value.

Additionally, alternative risk transfer strategies are available such as structured programs and integrated programs. Structured programs are multiyear solutions with fixed premiums for budget certainty. You’re essentially setting up your own internal insurance company to manage a portion of some risks, including even some risks that can be difficult to insure such as wildfire and floods.

Looking Ahead: Market Stabilization on the Horizon

While current conditions remain challenging, there are signs of potential relief. Despite these challenges, the market shows signs of increased stability for the first time in six years. With stability comes growth, and with growth comes increasing demand for broader coverage and increased limits.

The Federal Reserve’s monetary policy may also provide some relief. The Federal Reserve’s projections indicate 3 potential interest rate cuts next year from the current range of 5.25% to 5.5%, with the markets expecting these cuts as early as May. Such reductions could trigger increased dealmaking activity and lower the cost of refinancing.

As NYC’s commercial real estate market continues its recovery, businesses must adapt to the new reality of higher insurance costs while working with experienced brokers who understand the local market dynamics. The key to success lies in proactive risk management, accurate property valuations, and partnering with insurance professionals who can navigate the complex landscape of commercial coverage in America’s most dynamic real estate market.