News
Issue No. 7 - October/November 2002
News Snapshots
Insurance disaster looms for tenants
Commercial property owners in Adelaide are being forced to pay thousands of dollars extra in insurance premiums to incorporate protection against acts of terrorism, which are now specifically excluded from general insurance policies.
This will translate into substantial jumps in rentals when leases are renegotiated or new leases are taken out, according to Mr Bruce Foreman, the South Australian Director of Asset Services for commercial property agents Knight Frank.
Mr Foreman said that insurance against terrorism, once part of a general property insurance policy, now cost about $5 per square metre extra. For high rise buildings in Adelaide CBD, this translates to about $150,000 extra a year in premiums.
“As a result of the September 11 terrorist attack last year and the current crisis in the insurance industry, the cheapest cover against terrorism now starts at about $5 per square metre,” he said.
“At the same time, normal insurance premiums for commercial properties have risen by between 70 and 90 percent, or about $3.50 a square metre, while the excess payable by the policy holder has generally been increased 10-fold to contain the premium increases.
“For an average sized business leasing about 500 square metres, just covering the increased premiums will cost more than $4,000 a year. This will be a significant impost to business.”
These rises in insurance costs did not take into account the jump in power costs which recently hit building owners when full contestability came into effect.
Bruce said that public liability cover for some shopping centres was also proving extremely difficult, or very expensive to obtain.
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