Construction Material Cost Continues To Increase. What Does This Mean For My Commercial Building?
Construction material costs increased by 7.4% in September compared to the same month in 2017, according to an Associated General Contractors of America (AGC) analysis of U.S. Labor Department data. In the past year, tariffs have caused producer price index increases of 29.3% for diesel fuel, 22.1% for steel pipe and tubing and 11.7% for fabricated structural metal, among other cost increases. Over the past year, contractors increased their construction fees for nonresidential properties by 3.5%, which indicates firms are absorbing increased costs, according to the report. Additionally, 80% of respondents to an AGC August survey reported difficulty filling hourly worker positions, resulting in 62% of firms paying higher salaries to attract and retain workers.
What does this mean for my Commercial Building Insurance policy?
If you own a commercial building, whether it be an apartment, industrial, office, or retail building, you should pay close attention to the Building insurance limit you have on the policy.
Perhaps you secured a policy years ago and haven’t looked at it in a long time. Or, have no idea how much you should be insuring your building for in the event of a fire, or earthquake.
Our economy is cranking right now. Contractors have more jobs than they know what to do with. Their employees are in high demand and they need to pay high salaries to keep their talent. More demand equals higher costs.
This isn’t 2009 when contractors were begging for work and you could basically name a price when hiring them for a job. They are busy and selective on which jobs they choose in today’s economy.
From what we’re hearing from Southern California based general contractors right now, their costs for material and labor are at least $300-$400 per square foot to build. So if you have a 20,000 square foot commercial building, you should probably be insuring that for at least $6M Replacement Cost value (20,000 x $300 per sq/ ft).
My suggestion is that you dig up your commercial building insurance policy and check what limits of insurance you have for the building coverage. If you’re severely underinsured, call your commercial insurance agent/broker and ask them what it would cost to endorse your policy with the limits suggested above. You’ll be happy you did if you suffer a loss in the coming day/week/month/year.