Commercial Property Rebuild Cost Assessment for Insurance

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Accurate Commercial Property Valuation Mitigates the Risk of Underinsurance

Accurate commercial property rebuild cost assessment for insurance purposes plays a pivotal role in protecting property owners from the risk of underinsurance. Yet research shows, that over 85% of properties aren’t insured for the correct amount.

Determining the accurate value of a commercial property for insurance purposes can be a complex task. In this article, we delve into the realm of commercial property valuation for insurance purposes, exploring key considerations and methodologies that underpin this crucial process.

If you are considering a professional valuation of your or your client’s commercial property contact us by clicking the button below.

Click To Call 086 357 1713

Understanding Reinstatement Cost Assessment for Insurance Purposes

Commercial property can be valued in a number of different ways e.g. according to its original cost, according to market value, according to income potential, or according to its replacement cost, and some other less common methods.

Reinstatement cost assessment refers to the accurate assessment of the costs associated with reconstructing a commercial property to its original condition following a total loss. It encompasses not only the physical reconstruction of the building but also the costs associated with materials, labour, architectural fees, and other necessary expenses. What’s more the reconstructed property has to adhere to the currently enforced building regulations, which might have not been in force when the property was originally constructed.

Reinstatement cost assessment is different from market value, which represents the estimated price at which a property would sell in the open market. While market value takes into account intangible factors such as property appeal, demand, etc., rebuild cost valuation focuses solely on the tangible costs of rebuilding or repairing the property.

Key Factors Influencing Reinstatement Cost Assessment

Several factors contribute to the accurate determination of rebuild cost for commercial properties. These factors include:

  1. Construction Materials and Methods: The type of materials used and the construction techniques employed significantly impact the rebuild cost. Factors such as the quality of materials, complexity of design, and adherence to building codes and regulations are crucial considerations.
  2. Building Size and Layout: The size and layout of the commercial property influence the amount of space that needs to be reconstructed, as well as the costs associated with restoring specific features, such as elevators, staircases, or specialized equipment. Different property types, such as retail, office, industrial, or mixed-use, have varying valuation considerations based on their characteristics, usage, and potential risks
  3. Location-Specific Factors: The geographical location of the property can affect rebuild costs due to variations in labour rates, availability of construction resources, and local building and zoning regulations.
  4. Additional Factors: Special features such as unique architectural elements, advanced technology systems, specialized machinery, or environmentally sustainable components can impact the rebuild cost.
  5. Market Conditions: Fluctuations in construction material prices, labour costs, interest rates and other market conditions can affect rebuild cost estimates.
  6. Additional costs e.g. cost of demolition and rubble removal , site preparation, scaffolding hire, material delivery costs and many more.

Benefits of Accurate Rebuild Cost Valuation

  1. Adequate Insurance Coverage: Accurate rebuild cost valuation ensures that commercial property owners secure sufficient insurance coverage. Underestimating the rebuild cost can result in being underinsured, leading to substantial financial losses in the event of a claim. Conversely, overestimating the rebuild cost can lead to unnecessary higher premiums.
  2. Swift Recovery: In the unfortunate event of damage or destruction, having an accurate rebuild cost valuation expedites the insurance claims process and facilitates a quicker recovery. Property owners can confidently initiate the restoration process, knowing that the coverage is aligned with the actual costs involved.
  3. Risk Mitigation: By obtaining an accurate rebuild cost valuation, commercial property owners can assess the potential risks and make informed decisions regarding risk management strategies. This includes evaluating the need for additional coverage options, such as business interruption insurance or extended replacement cost coverage.
  4. Investment Protection: Commercial properties are substantial investments, and accurate rebuild cost valuation helps protect these investments. By ensuring proper insurance coverage, property owners safeguard their financial interests and provide reassurance to lenders and investors.


Rebuild cost valuation for commercial properties is a critical aspect of insurance coverage. Accurately assessing the expenses associated with reconstructing a property ensures that owners obtain appropriate insurance protection, mitigate financial risks, and facilitate a swift business recovery.

Given the complexities involved in accurately estimating rebuild costs, it is advisable for commercial property owners to enlist the services of professional appraisers or surveyors specializing in insurance-related valuations. These experts possess the necessary knowledge, experience, and access to industry data to conduct comprehensive assessments and provide reliable rebuild cost estimates.

If you need help with an accurate rebuild cost valuation of your or your client’s commercial property, give us a call by clicking on the button below. Trevor Kelly is a Chartered Building Surveyor with close to 20 years of experience in the insurance industry. You can view his credentials here.

Click To Call 086 357 1713

Why is the Rebuild Cost Review important?

According to SCSI – Ireland’s leading body for property, land and construction professionals, the national annual rate of construction price inflation is now running at 14% .Lockdowns due to Covid, supply chain shocks and the war in Ukraine have seen tender price inflation rise by 22% over the past 18 months.

Rebuild Cost Assessment Follow Up

After a thorough Reinstatement Cost Assessment, to ensure that your rebuild value remains correct and up to date, we recommend following the RICS best practice guidelines which state that a desk-based Rebuild Cost Review should be completed 2 to 3 years after the full Reinstatement Cost Assessment.