U.S. property values for residential, commercial and industrial properties continue to increase faster than GDP growth and the general rate of inflation, says a new report from catastrophic risk management consulting and modeling firm Karen Clark & Co. The report, “Increasing Concentrations of Property Values and Catastrophe Risk in the U.S.,” notes that insured property values increased by 9% from 2012 to 2014.
Building values now exceed $40 trillion; when contents and time element exposures are added in, estimated insured property values climb to more than $90 trillion, which “includes the cost to rebuild these properties as well as the contents and time element exposures, such as additional living expenses,” says Karen Clark, president and CEO.
Highly concentrated pockets of exposure, particularly in regions vulnerable to natural catastrophes, increase the probability of mega-catastrophe losses. For example, six counties in the U.S. have more than $1 trillion of exposure each and, on a combined basis, account for more than 12% of the U.S. total. Los Angeles County alone accounts for more than 3% of exposed property values.
The cost to replace residential and commercial properties destroyed by natural disasters has continued to rise faster than the general economy, primarily due to increasing construction costs per square foot.
For U.S. residential properties, average costs can range from a low of $45 in some areas of the country to a high of more than $250 per square foot in New York and San Francisco. Certain properties, such as healthcare facilities, can cost more than $350 per square foot to rebuild while lower value buildings, such as parking garages, are closer to $50 per square foot on average.
The U.S. state with the most property value is California, followed by New York and Texas. The top 10 states account for more than 50% of the U.S. total.
The U.S. vulnerability to hurricanes and other coastal hazards continues to rise because of increasing concentrations of property values along the coast. Of the $90 trillion in total U.S. property exposure, more than $16 trillion is in the first tier of Gulf and Atlantic coastal counties, an increase from $14.5 trillion in 2012.