Reconstruction costs surge over 10 years, with stabilisation expected in 2025: Verisk

Verisk, a company specialising in data analytics and risk assessment, has published a detailed report examining trends in reconstruction costs for residential and commercial properties across the United States.

This comprehensive analysis, covering October 2014 to October 2024, draws on Verisk’s extensive building cost research and provides insights into the factors driving cost increases over the past decade.

The report also offers projections for 2025, predicting a return to growth rates more consistent with pre-pandemic levels from January through July.

According to Verisk’s findings, national residential reconstruction costs, which encompass materials and retail labor, have surged by 63.7% over the past ten years. Between 2014 and 2019, costs grew by 19.8% nationally, with state-level increases ranging from 12.6% to 26.9%.

Washington, Nevada, Idaho, Oregon, and Kentucky experienced the most pronounced rises during this period. Verisk’s analysis further highlights that the subsequent five years, from 2019 to 2024, saw an even steeper 43.9% average growth nationwide, with state-level growth ranging from 34% to 44.9%.

Rhode Island, New Hampshire, Montana, Utah, and Idaho were identified as the states with the highest increases during this period. Verisk’s data also reveals a shift in the annual average growth rate, which climbed from 4% in the first half of the decade to 7.3% in the latter half.

Verisk’s report also indicates that commercial reconstruction costs followed a similar pattern, rising by an average of 58.4% nationwide since 2014. Between 2014 and 2019, Verisk’s data shows that costs grew by 16.6%, with state-level increases ranging from 11.6% to 25%.

Washington, Nevada, Oregon, Idaho, and Minnesota were the states most affected during this time. From 2019 to 2024, commercial reconstruction costs accelerated further, growing by 41.8% nationally and between 28.7% and 45.5% at the state level.

According to Verisk’s analysis, Rhode Island, Florida, New Hampshire, Utah, and New Mexico saw the sharpest increases. The report highlights that annual growth rates in commercial reconstruction more than doubled, rising from 3.3% during the first five years to 7.2% in the latter half of the decade.

Lumber costs, a critical component of reconstruction, have also shown dramatic increases over the ten-year period, as reported by Verisk. Nationally, lumber prices have risen by an average of 43.8% since 2014.

The first five years saw relatively modest growth of 3.9%, but Verisk’s data indicates a sharp increase of 39.9% in the following five years. States such as Utah, Hawaii, Washington, Montana, and New Mexico were the most affected, with costs in Montana, Washington, and Utah growing by more than 50% during the latter period. Conversely, Verisk’s analysis identifies Iowa, Indiana, Pennsylvania, Kansas, and Alaska as the states with the smallest increases in lumber costs.

By regularly conducting and sharing such in-depth analyses, Verisk continues to provide valuable insights into reconstruction cost trends and their drivers. This latest report underscores the significant changes of the past decade while offering a forecast for more stable growth rates in the months ahead.

“Over the past 10 years, we have seen a dramatic increase in reconstruction costs. In particular, the pandemic had a significant effect on building costs, reporting just over a 25% average increase for both commercial (24.3%) and residential (25.9%) costs from March 2020 through May 2023.

“This trend slowed after the pandemic but the impacts of inflation, labor market strains and supply chain delays still lingered – between April 2023 to October 2024 both commercial (12.4%) and residential costs (10.7%) continued to grow, averaging an 11.5% increase,” explained Trish Hopkinson, Head of 360Value at Verisk.

“Rising reconstruction costs as such can make it more expensive for insurers to pay claims for property damage and increase policy premiums.”

Verisk’s Market Expectations Index, designed to provide forward-looking insights for clients, predicts that growth rates will align more closely with pre-pandemic levels between January 2025 and July 2025, with residential growth expected at approximately 2% and commercial growth at 2.2%.

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