Reconstruction costs for both residential and commercial properties have risen sharply over the past ten years, with national residential costs increasing by 63.7% and commercial costs climbing by 58.4%, according to an analysis by Verisk’s 360Value. The report highlights significant cost escalations across multiple states, driven by factors such as inflation, supply chain delays, and labor market strains.
Residential Reconstruction Costs See Substantial Increases
Verisk’s data reveals that national residential reconstruction costs—including materials and retail labor—grew at an annual average rate of 4% from October 2014 to October 2019. However, in the subsequent five-year period, that rate nearly doubled to 7.3%.
- From October 2014 to October 2019, residential reconstruction costs increased by 19.8% nationally, with Washington, Nevada, Idaho, Oregon, and Kentucky experiencing the highest increases.
- Between October 2019 and October 2024, costs surged by 43% nationally, with Rhode Island, New Hampshire, Montana, Utah, and Idaho leading the cost growth.
- The COVID-19 pandemic notably impacted building costs, causing an average increase of 25.9% in residential reconstruction costs between March 2020 and May 2023.
- Lumber costs, a significant component of reconstruction, surged by an average of 43.8% since 2014, with Montana, Washington, and Utah experiencing over 50% increases in the past five years.
Commercial Reconstruction Costs Follow a Similar Trend
Commercial reconstruction costs mirrored the residential sector’s increases, with national costs rising at an annual average rate of 3.3% from 2014 to 2019, before jumping to 7.2% in the next five-year span.
- From October 2014 to October 2019, commercial reconstruction costs rose by 16.6% nationally, with Washington, Nevada, Oregon, Idaho, and Minnesota seeing the largest increases.
- Between October 2019 and October 2024, costs grew by 41.8% nationwide, with Rhode Island, Florida, New Hampshire, Utah, and New Mexico experiencing the most significant cost hikes.
- The pandemic contributed to a 24.3% rise in commercial reconstruction costs from March 2020 through May 2023, followed by an additional 12.4% increase from April 2023 to October 2024.
Future Cost Projections Show Slower Growth
Despite the sharp increases over the past decade, Verisk’s Market Expectations Index predicts a slowdown in reconstruction cost growth. From January to July 2025, residential costs are expected to rise by approximately 2%, while commercial costs are projected to increase by 2.2%—closer to pre-pandemic levels.
Verisk’s findings emphasize the long-term implications of rising costs for property insurers and policyholders. Higher rebuilding expenses increase claim payouts, which can lead to higher policy premiums. While the rapid cost escalation seen in recent years is slowing, the industry must remain vigilant in addressing economic and supply chain factors that impact reconstruction pricing.