The Importance of Property Appraisals in a Volatile Tariff Environment

How Rising Costs Are Affecting Public Sector, Industrial, and Commercial Property Owners

With the recent reintroduction of tariffs between the United States and Canada, property owners across the country are facing a new layer of risk. These trade measures, designed to protect domestic industries, are having unintended consequences on construction costs, equipment pricing, and ultimately, insurance coverage. For public sector institutions, industrial facilities, and commercial real estate holders, it is now more important than ever to ensure their insurance values reflect current realities.

At the heart of this issue is the concept of replacement cost — the amount it would take to rebuild a property or replace equipment with materials of like kind and quality at today’s prices. When tariffs increase the cost of imported steel, aluminum, lumber, and machinery, the replacement cost of buildings and machinery and equipment also goes up. Without an updated insurance appraisal, property owners are at risk of being significantly underinsured.

1. Tariffs Are Driving Up Replacement Costs

As of 2025, the U.S. has imposed 25% tariffs on Canadian steel and aluminum, and duties on Canadian softwood lumber are approaching 40%. These materials are foundational to construction and manufacturing. From structural steel and rebar to window frames, ductwork, and framing lumber, nearly every component of a building or piece of equipment is now more expensive to replace.

This impacts insurance in a very direct way: if your policy is based on outdated valuations, your coverage might not be sufficient to cover a total loss. This can result in significant out-of-pocket expenses for rebuilding or replacement.

2. Avoiding Co-Insurance Penalties

Most commercial and public sector insurance policies include a co-insurance clause. This provision requires that the insured value of a property be within a certain percentage (often 90% or 100%) of its actual replacement cost. Failure to meet this threshold can result in penalties, even if the loss is partial.

In a tariff-inflated cost environment, many property owners may unknowingly fall below this threshold. An appraisal performed by a qualified firm ensures compliance and helps protect against these avoidable penalties.

3. Accounting for Supply Chain Changes and Tariff-Related Costs

Tariffs have not only raised prices but also disrupted global supply chains. Contractors and equipment suppliers are now sourcing materials from alternate markets, often at higher prices and with longer lead times. These hidden costs — logistics, duties, expedited shipping, and procurement complexities — all factor into what it truly costs to rebuild or replace assets.

An accurate appraisal includes these updated cost considerations, helping property owners set realistic insurance limits.

4. Industrial and Specialized Equipment Risks

Industrial operations face a unique set of challenges. Much of the machinery and equipment used in manufacturing, energy, and processing industries is imported or built with tariff-affected materials. Replacing this equipment is now significantly more expensive.

If you have not completed an insurance appraisal recently, there’s a good chance your coverage doesn’t reflect these increases. An appraisal can capture current values and protect against coverage gaps that could delay or hinder recovery after a loss.

5. Public Sector and Commercial Real Estate Implications

Municipal buildings, schools, hospitals, and other public assets must also contend with rising construction costs. For government entities with tight budgets, being underinsured can have major implications for recovery and service continuity following a disaster.

Similarly, developers and commercial property owners operating on thin margins or under fixed-price contracts could find themselves severely exposed if their insured values are outdated. Appraisals are not just for insurance; they also support budgeting, capital planning, and financial reporting.

6. Strengthening Insurance Placement and Claim Support

In today’s market, insurers are paying closer attention to insured values. A current, professionally prepared appraisal provides credibility and helps in securing favorable terms and conditions during renewals. It also improves claim outcomes by demonstrating that values were based on independent, up-to-date analysis.

The Bottom Line: Now Is the Time to Act

Tariffs are reshaping the cost landscape for construction and equipment across Canada. For property owners, staying ahead of these changes means ensuring your insurance coverage is accurate and defensible. A professional insurance appraisal is a proactive, cost-effective step that protects your assets, improves compliance, and provides peace of mind.

Whether you’re managing a municipality, running a manufacturing operation, or investing in commercial real estate, now is the time to reassess your property values. In a volatile trade environment, knowledge is not just power — it’s protection.

Risk Management Bulletin: Earthquake Preparedness

In recent weeks, British Columbia experienced earthquakes on February 24 and March 3, 2025. There were also seven earthquakes in 2024 with magnitudes ranging from 5 to 6.4. While the effects were not large, their frequency acts as a reminder of the critical role of emergency preparedness.

Earthquakes can strike without warning, leaving communities without essential services and supplies. Suncorp Valuations supports the belief that a well-stocked emergency kit can make a significant difference in ensuring your safety and well-being in the aftermath of a disaster.

Below, we have outlined a comprehensive checklist of essential items to help you and your loved ones stay prepared and resilient in the face of an earthquake emergency.

SURVIVAL ESSENTIALS

These items are necessary to sustain life immediately after an earthquake when help may not be readily available:

• Water: At least 4 liters per person per day for a minimum of three days (for drinking and sanitation)
• Food: Non-perishable food items with a long shelf life
• First Aid Kit: Basic medical supplies including bandages, antiseptic wipes, pain relievers, and prescription medications
• Emergency Blanket: Thermal blankets to retain body heat
• Multi-Tool or Knife: Useful for various tasks such as opening cans or cutting materials
• Flashlights: Battery-powered or hand-crank flashlights
• Extra Batteries: For flashlights, radios, and other essential devices
• Whistle: To signal for help
• Portable Phone Charger: Preferably solar-powered or battery-operated
• Cash: Small bills and coins in case ATMs and credit card systems are down
• Important Documents: Copies of identification, insurance policies, and emergency contact lists in a waterproof container

SAFETY & PROTECTION

These items help protect against hazards caused by the earthquake and ensure security:

• Dust Masks (N95 preferred): Protect against inhaling dust and debris
• Work Gloves: To handle debris safely
• Sturdy Shoes: Closed-toe shoes for navigating damaged areas
• Protective Eyewear: Shields against airborne debris
• Duct Tape & Plastic Sheeting: Useful for sealing off contaminated areas
• Local Maps: To find evacuation routes and emergency shelters
• Emergency Radio: Battery-powered or hand-crank radio to stay informed about updates and rescue efforts

MISCELLANEOUS/ADDITIONAL CONSIDERATIONS

• Personal hygiene/toiletries items: Such as an extra pair or glasses or contact lenses
• Stationery: Pen and paper or notepad
• Keys: House and car

• Store the kit in a durable, accessible container
• Check and update supplies every six months
• Customize the kit based on household needs (e.g. pet supplies, infant necessities)
• Consider keeping a smaller version in your car in case you are not home during an earthquake

By assembling a well-prepared earthquake emergency kit, you can improve your ability to stay safe and sustain yourself in the aftermath of a major earthquake.

SUNCORP’S RISK SERVICES GROUP

Being proactive is a key element to risk management for your business or personally. At Suncorp, our commitment extends beyond standard property appraisals. We offer specialized risk inspection services designed to:

• Identify Potential Hazards: Our detailed inspections help uncover risks that might not be immediately visible, ensuring no threat goes unnoticed.
• Provide Expert Analysis: Our experienced team analyzes potential risks and offers expert recommendations to mitigate them effectively.
• Enhance Property Safety: By addressing risks proactively, you can enhance the safety and security of your property, protecting both your investment and occupants.
• Ensure Regulatory Compliance: Stay ahead of regulatory requirements by addressing potential risks identified during our comprehensive inspections.

If you’d like to learn more about how our team can assist you with risk management, please don’t hesitate to reach out to Shamair Turner – Manager, Risk Management at Shamair.Turner@suncorpvaluations.com.

Impact of Tariffs and Labor Shortages on Construction Costs in the U.S. and Canada

The recent imposition of tariffs by the United States on Canadian and Mexican imports, along with Canada’s retaliatory measures, is set to significantly affect construction costs in both Canada and the US, if a resolution is not found. These tariffs will increase the price of essential building materials and building services equipment, while ongoing skilled labor shortages on both sides of the border—exacerbated by the Trump administration’s intensified deportation policies—will further strain the industry. The combined impact of these economic and labor pressures could lead to substantial cost increases and project delays, with some regions being affected more than others.

Impact of Tariffs on Construction Costs

Regional Effects in the United States

The U.S. has implemented a 25% tariff on key Canadian imports such as softwood lumber and gypsum board—materials that are vital for residential and commercial construction. Since over 70% of these materials used in the U.S. come from Canada, this policy will create cost pressures that will vary by region:

• Northeast and Midwest: These regions are heavily reliant on Canadian lumber and gypsum. The tariffs will lead to significant price increases, making construction more expensive. Builders may struggle to find alternative suppliers, leading to delays and increased costs for homebuyers and commercial developers.
• Southern U.S.: This region has an active lumber industry, which could mitigate some of the tariff effects. However, if other regions shift their purchasing to local suppliers to avoid tariffs, demand could spike, driving up prices even in areas with a strong domestic supply.
• Western U.S.: While Western states import some materials from Canada, they also have access to Pacific Northwest lumber supplies. This could provide a partial buffer, though costs will still rise due to broader national demand shifts.

Regional Effects in Canada

Canada has imposed retaliatory tariffs on U.S. goods, including construction materials and industrial machinery, which will impact costs differently across the country:

• Central and Eastern Canada (Ontario, Quebec, Maritimes): These provinces import a significant portion of their construction materials from the U.S., such as steel, cement, insulation and plumbing products. Tariffs will raise costs for builders and developers, making housing and infrastructure projects more expensive.
• Western Canada (British Columbia, Alberta, Saskatchewan and Manitoba): This region has abundant timber resources and is more self-sufficient in construction materials. However, they do import construction materials such as steel and cement products. Also, interprovincial demand for lumber products could increase as other regions look for domestic alternatives, potentially raising local costs.

Impact of Skilled Labor Shortages on Construction

U.S. Labor Challenges

The construction industry in the U.S. already suffers from a skilled labor shortage, and the Trump administration’s push to deport undocumented workers could worsen this problem. A significant portion of construction workers in the U.S. are undocumented workers, and their removal would create severe labor gaps, leading to:

• Southwest and Southeast: States such as Texas, Arizona, and Florida rely heavily on immigrant labor. Deportations could cause major disruptions, leading to project delays and wage inflation as competition for legal workers intensifies.
• Northeast, Midwest and Northwest: While less reliant on immigrant labor, these regions will still feel the effects of a national labor shortage. With fewer available workers, construction timelines could lengthen, further increasing costs.

Canada’s Construction Workforce Crisis

Canada’s construction sector faces its own labor shortages, largely due to increasing housing demands and an aging workforce. With approximately 700,000 skilled tradespeople set to retire by 2028, the industry is struggling to attract new workers. The impact will vary by region:

• Western Canada (BC, Alberta, Saskatchewan & Manitoba): These provinces are experiencing rapid growth, increasing the demand for skilled labor. The shortage could lead to higher wages and project delays, further driving up construction costs.
• Central Canada (Ontario, Quebec): While facing similar challenges, these provinces have more extensive training programs and immigration strategies that could mitigate some of the labor shortages.
• Eastern Canada (New Brunswick, Nova Scotia, Newfoundland and Labrador, PEI): These provinces also have construction labour shortages, due to many factors including booming residential construction markets, such as Moncton’s and migration of skilled workers to other provinces.

Projected Cost Increases Due to Tariffs and Labor Shortages

If the tariff issue is not resolved in short order and the projected economic and labor trends persist, construction costs could rise substantially across North America over the next couple of years:

• United States: Regions heavily dependent on Canadian materials and immigrant labor (Northeast, Midwest, Southwest regions) could see construction cost increases of 15-20%. Other regions may experience slightly lower 10-15% cost hikes.
• Canada: Central and Eastern Canada, which relies on U.S. imports and is facing labor shortages, could see cost increases of 10-15%. Western Canada may experience 5-10% increases due to higher interprovincial demand for labor and materials.

Conclusion

The dual impact of tariffs and skilled labor shortages is creating significant headwinds for the construction industries in both the U.S. and Canada. While some regions will be more affected than others, overall construction costs are expected to rise, leading to longer project timelines and increased housing and infrastructure expenses. Addressing these challenges will require strategic policy responses, including investment in the workforce training, immigration reforms to bolster labor supply, and efforts to stabilize trade relations to ensure affordable material sources.

The Role of Professional Valuators in Supporting Successful Mergers & Acquisitions

The goal of any corporation is growth, whether achieved organically or inorganically. Globally, 30–50% of corporate growth is driven by inorganic methods such as mergers and acquisitions (“M&A”). This trend is particularly pronounced in high-technology, healthcare, and pharmaceutical industries due to high research and development (“R&D”) costs and the strategic appeal of acquiring existing intellectual property. For instance, Google (Alphabet) has experienced tremendous growth through over 200 acquisitions since its inception.

In North America, M&A activity slowed over the past two years due to high interest rates and uncertainty surrounding the U.S. presidential election. However, with interest rates now declining and the election concluded, M&A activity is projected to increase in 2025 and beyond. The table below illustrates the value of M&A activity in Canada and the U.S. over the past five years:

Business combinations, including M&As and partnerships, can accelerate growth more rapidly than organic strategies. However, they come with higher risks, such as integration challenges and substantial capital requirements. Moreover, significant due diligence is needed before acquisition and compliance requirements must be met, post-acquisition.

The Role of Valuation Professionals

Valuation professionals, including business valuators and tangible asset appraisers, play a critical role throughout M&A transactions. Their expertise supports the acquirer in both pre-acquisition and post-acquisition processes.

Pre-Acquisition Due Diligence

During this stage, valuation professionals can provide:

1. Business Enterprise Valuation (BEV):
   • Independent valuation of the target company to ensure accurate, unbiased assessments for purchase negotiations and future planning.
2. Tangible Asset Valuations:
   • Preliminary verification and valuation of property and assets slated for acquisition.
   • In horizontal acquisitions involving multiple facilities, accurate valuations on a per-facility basis can guide decisions about which facilities to retain, sell, or liquidate.

Post-Acquisition: Financial Reporting

Valuation professionals are essential for ensuring compliance with financial reporting standards, which differ slightly between the U.S. and Canada:

United States: Under ASC 805: Business Combinations (U.S. GAAP) acquired assets and liabilities must be measured at fair value on the acquisition date. This process, known as purchase price allocation (PPA), includes:

• • Identifying tangible and intangible assets.
  • Assessing liabilities, including contingent liabilities.
  • Calculating goodwill as the residual value after allocating the purchase price to the fair value of net identifiable assets.

Canada: Under IFRS 3: Business Combinations, fair value measurement and goodwill calculation requirements align closely with ASC 805.

Post-Acquisition: Tax Reporting

Valuation professionals also help meet tax reporting compliance requirements, including asset revaluation, depreciation, and assessing potential tax liabilities resulting from the transaction.

Valuation at Fair Value

Fair value measurement is central to both financial and tax reporting in M&A transactions. It involves:

1. Identifying and Valuing Assets and Liabilities:
   • Tangible assets: Property, plant, and equipment.
   • Intangible assets: Trademarks, patents, customer relationships, contracts.
   • Financial assets and liabilities: Investments, debt.
2. Valuation Methodologies:
   • Market approach: Comparison to similar transactions or market data.
   • Income approach: Discounted cash flows or other income-based methods.
   • Cost approach: Replacement or reproduction cost.

Additional Services Provided by Valuation Professionals

Professional valuators can also offer additional services, such as:

1. Fixed Asset Systems Integration:
   • Recording acquired fixed assets to align with the acquiring company’s systems (e.g., SAP).
2. Asset Management Support:
   • Recording production equipment technical details to support the implementation of asset management plans.
3. Insurance Appraisal:
   • Providing valuations for adequate insurance coverage.

Why Engage Qualified Valuation Professionals?

The complexity of valuation requirements, such as purchase price allocation, necessitates the engagement of experienced, independent valuation professionals. A well-reputed valuation firm can deliver services that:

1. Meet Regulatory Standards: Ensure compliance with financial and tax reporting standards.
2. Demonstrate Relevant Expertise: Have industry-specific experience and a proven track record.
3. Provide Comprehensive Solutions: Offer a “one-stop” service to eliminate inefficiencies, duplication, and gaps.

Mergers and acquisitions are high-risk, high-reward strategies for corporations seeking growth and diversification. A key component for success is engaging qualified valuation professionals who can provide accurate, compliant, and timely services. Their expertise not only supports informed decision-making but also ensures regulatory compliance, contributing to a smooth and successful transaction.

Suncorp Valuations at the 2024 RIMS Canada Conference in Vancouver!

Suncorp Valuations is excited to be an exhibitor at the 2024 RIMS Canada Conference, taking place from October 6-9 at the Vancouver Convention Centre. Join risk professionals from around the world to gain valuable insights and techniques for enhancing risk management practices.

Come visit us at booth #134 where Tom Gardiner, Devin Baker, Vic Persaud, Shamair Turner, Robyn Vey, and Lora Manor will be delighted to answer any questions you have related to appraisals, risk management, or many other services we offer. Plus, take part in fun games and get a chance to win earbuds and gift cards!

We’re honored to be part of this incredible event and can’t wait to connect with you. See you in Vancouver!

Join us at the 2024 ASA International Conference!

As a proud Gold Sponsor for the past three years, Suncorp Valuations is thrilled to attend the 2024 ASA International Appraisal Conference in Portland, Oregon.

Our President and CEO, Tom Gardiner, ASA MRICS, along with Gregg Davenport, ASA, Manager of Professional Services, and Steve Hewitt, ASA, Manager of Professional Services, will be present.

We invite you to join Gregg and Steve on September 16th from 2:35 PM to 3:35 PM for their presentation on “Insurance Appraisals – Making Sure You’re Covered.”

We eagerly anticipate reconnecting with our friends, colleagues, and fellow valuation professionals from around the globe at this prestigious event!