This is How the New Norm in Remodeling Impacts Commercial Lines



We recently compared commercial new construction and commercial remodeling over the course of the Great Recession. Based on the findings of our residential study, we suspected there might also be a similar trend in commercial construction.

The results from this new study illuminate some interesting findings, especially as they relate to commercial lines.

Additions, remodels, and alterations (ARAs) on commercial structures took a meager dip after the construction market downturn when compared to new commercial construction permits. At its lowest point, commercial ARAs took a 9.7% drop from the pre-crisis numbers.

Though not identical, the trends we saw in commercial remodeling were similar to the trends in residential remodeling. They both recovered after the housing crisis, but commercial remodeling dipped slightly below its pre-crisis peaks after it gained ground in 2013.


You can see that the upward trend starts as far back as 1999, and is interrupted only minimally before continuing its upward trajectory.

The decline of new commercial construction permits was significantly deeper, plummeting 39% after 2008 and continuing its slump through 2011. Between 2008 and 2011 there was a staggering 43% plunge.

Perhaps the most interesting finding was that new commercial construction permits are still far from reaching their pre-crisis levels. In fact, they’re sitting at 20% below where they were at their best.


To recap:

  • New commercial construction permits took a dramatic plunge of 39% after 2008 and are still at 20% below pre-crisis peaks.
  • Commercial remodeling permits took less of a hit with just a 9.7% dip after 2008, and gained ground by 3% in 2013; they’re currently sitting at just .7% below pre-crisis peaks.


“Commercial remodeling has stayed on its upward trajectory,” said Holly Tachovsky, CEO at BuildFax, “except for the small dip that we see during the construction downturn. On the other hand, commercial new construction saw a substantial downtrend that lasted for three years, and still remains below pre-crisis levels. Like we saw with residential remodeling, it appears as though commercial remodeling activity is less volatile than new construction activity.”

So what does all this mean for commercial lines?

Understand Property Changes 

These remodeling numbers show there are a lot of properties being updated and maintained well. But some are not. The numbers suggest a lot of activity is happening with existing structures, which indicate a growing disparity in how commercial structures are actually depreciating.

A lot can change after the snapshot taken at underwriting as the structure either continues to deteriorate or gets improved or maintained. This data shines a light on what’s really on your book.

Price More Competitively 

For competitive pricing in the commercial insurance space, it’s important to pay attention to this remodeling activity.

“These remodeling numbers can have a huge impact on pricing,” said Dan Kenney, Senior Director, Business Development. “Since carriers are able to give better prices when a certain proportion of a commercial building has been updated, knowing about these changes can play a pivotal role in staying competitive and being able to offer your customers the best price.”

Better Customer Experience  

All of this remodeling activity can be put to work behind the scenes as data to improve the customer buying process.

In flow-through underwriting models, using third party data can create a faster, more streamlined quoting process for commercial lines. And up-to-date data about a property and documented improvements that are found in building permits can make the process even more accurate and efficient.

It’s more important than ever to pay attention to the changing needs of business owners. That includes better understanding their behaviors and their evolving structures, especially as they pertain to property upkeep and remodeling.

These new remodeling numbers reveal huge opportunities to understand property condition as structures are updated over time and the businesses that inhabit them. Given the consistency of the data across the last decade and a half, we anticipate this upward trend to continue.

If you’d like to know more about how this new norm in remodeling activity can impact your business, contact Chris.


For this study, BuildFax looked at data from its database of building permit records. The data used includes commercial new construction (new construction of a commercial building) and remodeling project counts (work on an existing commercial structure) by year from 1999 – 2015.