Commercial Property Insurance in a Rebounding Market

Australia’s commercial property market is showing early signs of renewed momentum. Higher interest rates and subdued investor confidence created a period of softer conditions. However, as inflation stabilises and global sentiment improves, buyers are gradually returning.

While improving market conditions are positive for owners and investors, rising asset values also increase the importance of reviewing commercial property insurance arrangements.

As activity lifts across industrial, retail and office assets, exposures influencing long-term performance, insurability and resilience are also shifting.

Recent data from the Property Council of Australia indicates cautious optimism returning to segments of the market, particularly industrial and logistics assets. At the same time, broader economic indicators from the Reserve Bank of Australia show stabilising inflation trends, which are helping restore investment confidence.

These improvements bring opportunity — but also renewed responsibility.

A Changing Market Means Changing Risk

Industrial property remains the strongest performer, supported by sustained demand for logistics, warehousing and manufacturing facilities. Retail is stabilising in key precincts, while office vacancy rates, although still elevated in some CBDs, are gradually improving.

As commercial property values rise, several risk considerations become more prominent:

• Higher reinstatement costs as property values increase

• Greater foot traffic and operational activity elevating liability exposure

• Ongoing vacancy in some sectors attracting increased insurer scrutiny

• Continued construction cost inflation widening the underinsurance gap

According to the Australian Bureau of Statistics, construction input costs remain significantly above pre-2020 levels. For commercial property owners, this reinforces the importance of ensuring sums insured reflect current rebuilding costs, not historic purchase prices.

Growth is welcome — but it requires insurance programs to evolve alongside market conditions.

Key Issues for Commercial Property Owners

Reinstatement Costs and Underinsurance

Materials and labour remain considerably more expensive than in previous market cycles. Many commercial properties are still insured at outdated values, leaving owners exposed to shortfalls in the event of a major loss.

Underinsurance can result in reduced claim payments under average clauses. Professional building valuations and regular insurance reviews are increasingly important to maintain adequate commercial property insurance protection.

Asset Resilience and Climate Exposure

Weather-related losses are becoming more frequent and more costly across industrial estates, retail centres and office buildings.

Roof integrity, drainage infrastructure, fire systems and electrical components all play a role in loss prevention. Insurers are placing greater emphasis on resilience measures, documented maintenance and proactive upgrades.

Investment in preventative maintenance not only reduces loss severity but can also strengthen insurer appetite and pricing outcomes.

Tenant Mix and Operational Risk

As leasing activity improves, tenant profiles can shift quickly. Diverse occupancy, increased foot traffic and changes in building use all influence liability exposure.

Clear lease agreements, updated compliance documentation and regular communication with tenants help reduce disputes and clarify responsibilities in the event of a claim.

Insurance programs should reflect actual building usage and occupancy patterns, not assumptions based on previous leasing structures.

Increasing Due Diligence Expectations

Transaction volumes are lifting globally, and Australia often follows broader capital flow trends. Purchasers, lenders and insurers are placing increased value on documented maintenance histories, engineering reports, current valuations and structured risk assessments.

Well-prepared properties are easier to insure, more attractive to buyers and better positioned for efficient transaction settlement.

Strengthening Your Commercial Property Insurance Strategy

To stay ahead in a rebounding market, commercial property owners should prioritise:

• Annual review of sums insured

• Independent reinstatement valuations

• Regular building inspections and risk engineering assessments

• Climate resilience improvements

• Updated tenant and lease risk controls

• Early engagement with brokers during acquisition or refinancing

Commercial property insurance should not remain static while market conditions change.

The Bottom Line

A rebounding commercial property market presents opportunity — but it also raises the stakes for risk management.

As asset values and transaction activity increase, so does the importance of ensuring properties are accurately valued, properly maintained and supported by a structured commercial property insurance program.

Taking proactive steps now can help owners capture the upside of market improvement while reducing exposure to unexpected costs, coverage gaps or claim disputes.

As the market shifts, now is the right time to review how well your assets are protected.

Barrack Broking works with commercial property owners to deliver tailored insurance and risk advice aligned to their assets, tenants and long-term objectives.

If you would like to review your commercial property insurance program, speak with our team to ensure your cover reflects current market conditions.