Did Christmas cost you more this year? Maybe Thanksgiving dinner was a little pricier?
Have you spent more on groceries lately? Are you paying more for gas than you did 12 months ago? Have you bought a 2x4 in the past 18 months?
My guess is that you, like the rest of Americans (and our northern friends), are experiencing various cost increases.
Cost Increases are Everywhere
According to an article by the Commercial Property Executive, construction material costs from August 2020 to August 2021 are up 23.1%. Yes, that’s right. It is crazy out there.
Since the start of the pandemic, we have adjusted our construction cost projects for our consulting clients from $180-200/SF for just the building to pushing $250/SF. During my 34 years serving churches and their facilities, I have never seen such a hike.
I am sure some of you are saying, “So what? We have a building and have no intentions of building anything.” Yes, but have you talked to your insurance agent recently?
I serve on the board of directors of a couple of Property Owners Associations. We have recently received notices that due to the increased construction cost, they were raising our “replacement” value to reflect current market conditions. In turn, this increased our premiums — and not just by a little. I did not give it much thought as I have seen our association insurance volatile.
Then I talked to a colleague that is a prominent commercial property developer in the Southeast. He said they too were getting such a premium increase for the increase in replacement costs on millions and millions of dollars of commercial real estate — which ultimately becomes a “pass-through” expense to their tenants, raising their rent and causing them to raise prices for you and me.
Premium Increases for the Church
What tipped it for me, and the crux of me writing this was members of our Church Facility Management Solutions Facebook group started posting about the same thing related to premium increases for their church — ouch. That hits home for me.
One church shared that their replacement cost was $164/SF, but they were told that it would be increased to $250/SF. That is a 52% increase. I do not know how that equates to the premium increase, but that is significant.
Now, I am not an insurance professional, and I do not know how the various carriers will address this issue, but you need to be aware and not be surprised when they come knocking. These are real issues with real impacts on your church.
Moral of the story: do your homework and be prepared for more rising costs this year.