Has Rising Business Insurance Costs Affected Commercial Real Estate?
Yes — and the impact on Texas commercial real estate has been profound, reshaping deal economics, rental markets, and investment decisions across the state. Here is the complete picture.
Insurance Costs Have Doubled as a Share of Operating Expenses
The scale of the change in commercial real estate is staggering. Between 2019 and 2024, average commercial property insurance premiums grew more than 15% per year — and by nearly 30% in 2023 alone. Insurance costs have roughly doubled as a share of rental income and operating expenses over the past five years, transforming what was once a modest operating expense into a significant financial burden. For Texas specifically, states exposed to climate risks saw insurance costs jump 31% in just one year and a staggering 108% over five years — among the steepest increases in the nation.
Texas Commercial Properties Are Paying Among the Highest Premiums
Texas consistently ranks above the national average for commercial insurance costs. Texas premiums consistently run above the national average, driven by severe weather exposure from hail, wind, and flooding — which increases insurer loss ratios statewide — combined with high commercial real estate values in Dallas, Houston, and Austin metro areas that push replacement cost estimates upward, and an active commercial litigation environment in Harris and Dallas counties that adds further rate pressure. Many Texas businesses have seen commercial property insurance premiums rise by 10 to 40% in high-risk regions, putting added pressure on already tight budgets.
The Impact on Deals, Rents, and Property Values
The ripple effects of rising commercial insurance costs are reshaping the entire Texas real estate market. The sharp rise in insurance costs has direct consequences for both commercial tenants and building owners — insurance now represents a much larger share of operating expenses, forcing owners to raise rents or reduce coverage and potentially cut costs elsewhere, with these costs often passed through as part of tenant charges. When insurance becomes unaffordable or unavailable, property values suffer directly — a building that cannot be insured at a reasonable cost is worth considerably less to an investor.
Carriers Are Exiting High-Risk Texas Markets
The availability problem is compounding the cost problem. Due to the many losses, insurance companies are leaving markets they deem too risky — meaning the players who are left have some room to increase their pricing to manage the increased risk. Surplus lines carriers often step in when standard insurers exit, but these policies can be more expensive and less regulated — leaving Texas commercial property owners with fewer options and weaker consumer protections than they had just five years ago.
What Texas Commercial Property Owners Should Do
Work with an independent commercial broker to review coverage limits against current appraised values, explore higher deductibles to offset premium increases, and confirm whether your policy reflects 2026 replacement costs rather than outdated valuations. Contact the Texas Department of Insurance at 800-252-3439 with questions about commercial coverage availability in your market.
