+1 800.648.4807

Repurposing Commercial Property... Profitable Project or Risky Business?

Contain Cost, So Not All is Lost

Understanding the IssueRepurposing that Property Can be a Risky Business


Repurposing property is not a new trend, but it certainly is one that has increased in popularity in recent years. With more people working from home and the rapid replacement of brick-and-mortar retail with digital storefronts, repurposing commercial real estate is on the rise.  


Repurposing Commercial Property: THE APPEAL  

Save money. The cost of repurposing a building is generally cheaper than building one from the ground up. This is especially true given how expensive raw materials and goods are today.  

Location, location, location. Older buildings may be in good locations or in cities where land availability is scarce to nonexistent. Keep your desirable location while simultaneously refreshing your property. 

Return on Investment. Repurposing a commercial building provides an opportunity for real estate owners to continue to obtain value from an asset they have already invested in. 

Although there are some great reasons for wanting to repurpose commercial property, doing so also comes with its own set of risks. Before you can even begin thinking about repurposing, you need to know for what use the original building was made and approved. This dictates what you can and cannot do within building standards and codes.  


Repurposing Commercial Property: THE CHALLENGES

Time and money. Bringing a building up to code or changing its occupancy type can take a significant amount of time and can cost more than anticipated. Retrofitting a pre-existing building means that you might need to invest in additional insultation, update HVAC systems, as well as replace windows, piping, electrical wiring, and foundational components. Currently, construction costs are high, and many projects continue to see long delays even after much time and money has already been put into them.  

Uncertainty. Don’t take a building’s appearance at face value. Oftentimes repurposing a building requires far more work than meets the eye. You may not know the extent of repairs until you start tearing things down, impacting project timelines and budget. Maintenance records may not be available, leading to uncertainty about the longevity of plumbing, wiring, framing, and overall structural integrity. Not only can these factors cost you additional money and prolong completion, but they can create environmental hazards in the surrounding community.  

What do these challenges mean from a risk management perspective?  

Commercial real estate owners need to think about the risks associated with construction needed to repurpose the building before it is too late. Common risks include pollution exposures (asbestos, underground storage tanks, and chemical residue), worker injuries, damage/theft to equipment and tools, and commercial auto liability. To avoid potentially detrimental consequences to safety, liability, and financial resiliency, a proactive approach to risk management is vital.  

When a property is repurposed, its risk profile and coverage needs also change.  

Insurance capacity varies by industry, with overall capacity currently limited because of hardened market conditions. Don’t forget to do your due diligence in aligning your insurance portfolio with your repurposing efforts. Neglecting to do so may mean finding yourself in a situation where you are liable for thousands to potentially millions of dollars for an event where you are found to be at fault.  

Our skilled advisors have decades of experience throughout multiple market and economic trends. We’ll help you navigate the complexities of the risks that accompany repurposing commercial real estate. Partnering with a team of experts with top carrier relationships is a crucial component of solid risk management, particularly in unfavorable market conditions.  

Strategies to Manage the IssueYou’ve Decided to Repurpose Your Commercial Property – Now What?

We’ve talked about the risks associated with repurposing your commercial property and how vital it is to take action to protect your investment. Let’s take a look at what that action looks like: 

The first, and probably most important, thing you can do is actively communicate with your broker through every stage of the project. When a property is repurposed, both its risk profile and coverage needs also change and your broker will offer guidance about best practices to manage those risks. 

Review these areas with your broker to ensure you’re properly covered: 

Occupancy. A change of occupancy or purpose is a major change in your risk profile and may even require a different carrier. For example, if you plan to repurpose your retail building into an apartment complex, the occupancy requirements and regulations will change drastically. If the property is currently occupied but will sit vacant for an extended period of time, this will also need to be discussed to ensure proper coverage and prevent any coverage gaps. 

Policies during renovation. Properly orchestrating coverage before construction begins is crucial. Your broker will be able to guide you through the different types of policies that may be needed during the renovation process. This includes everything from how to insure your existing structure to builders’ risk, general liability and general excess liability, and controls around general contractors, such as how contracts are worded and need to be reviewed.  

Expenses post-renovation. Expenses don’t end once the building is repurposed. Make sure to get an idea of insurance expenses once the project is complete. This is important for both you and your broker because it will help shape your future budget and pave the way for proper coverage for your newly repurposed building. 

Historic properties. Many historic properties come with historic tax incentives. However, historic tax properties are contingent on keeping certain components of the original structure, such as windows or flooring. It is important to understand what pieces of the property are historic in nature and need to be restored back to historic pre-loss condition compared to replacing damaged real estate on a non-historic property.  


Taking the plunge to repurpose your property is a complex undertaking. Every project presents its own set of challenges and specifications, making it of the utmost importance to work with a team that is well-versed in the granularity of repurposing commercial property. Our skilled advisors have the expertise to guide you through your insurance needs and possess long-term relationships with top carriers to negotiate the right coverage for your needs. 

Determining a Path Forward – Repurposing Commercial Property? Contact Us Below.

Contact one of our trusted advisors today to see how we can best help you meet your goals while protecting your assets.

This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.