How to secure commercial property rebuild costs
Take a look at our guide to securing commercial property rebuild costs
The rebuild value of your property will have been provided by your RICS surveyor when you bought the property and, if you have financed your property through a mortgage, this is likely to also include a ‘reinstatement’ cost.
However, any type of major works could affect the rebuild cost, so if your tenants make any alterations, or you have decided to extend your commercial buildings or switch some of the property from commercial to residential, you will need to secure a new valuation. If you don’t, and something major should happen to the property, such as storm damage or fire, you may find your insurance doesn’t cover you for the full cost of reinstating the building.
The first thing to know about rebuild costs is they’re rarely the same as the price you paid for the property and are usually significantly lower. The definition is how much it would physically cost to reinstate the property should it be totally destroyed. If this did happen, you would still own the land that was included in the purchases price, which is why the rebuild cost is less. Having said that, you should be aware that some properties have been selling for less than their rebuild value since the credit crunch, so if you bought at a particularly good price in the following years, you may end up insuring your property at a higher amount. The capital value may have fallen, but the cost of rebuilding the property has remained more or less the same.
The Building Cost Information Service (BCIS) has an online rebuild calculator, but it’s mostly for residential property. If you really want to be sure you have a correct, up-to-date valuation, engage a RICS surveyor to help you assess how much it would cost to rebuild your property or portfolio.