For builders and contractors in South Florida, the worry is not the slowdown of residential construction that is worrying them. There is more than enough commercial jobs to keep everyone working and busy. But the real concern is how to handle the rapid increases in insurance and taxes that are hitting the commercial building owners. While commercial rents are built with certain expectations that fixed costs, insurance, and taxes will remain fairly consistant over time and lease will be long enough for the tenant to feel safe building their business in the location.

However, after the hurricanes over the past few years, insurance rates have skyrocketed. Add to this mixture the lust for money by local goverments, and landlords are concerned that when they sign tenants to a long term commercial lease, they will be upside down as their costs increase.

Many within construction and real-estate related industries say much will hinge on what happens with commercial insurance costs and availability. The Legislature convenes Tuesday to tackle the crisis.
Problems getting insurance could stall new projects. Commercial real estate broker Tom Dixon said existing commercial property owners are figuring out ways to pass on costs, including quoting rents that include a tenant share of property taxes and insurance.
”They’re going to pass on the costs,” Dixon said. “You’re going to pay a dollar more for your burger; your hair cut’s going to cost more because the landlord is charging more rent.” via the MiamiHerald.com

So the real issue will be inflationary fears as increased costs in insurance and taxes drive up the prices in coastal regions. For all of you out there watching these regions, that may be the real issue to keep in focus. Will the additional cost of severe weather be passed onto the local economy? South Florida may have the answers to these questions.

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