As mass timber rises in popularity as a preferred building material, it’s transforming the construction industry with its sustainability, cost savings and market benefits. However, these advantages come with unique risks that may impact your insurance, property management and maintenance strategies.

This article dives into key mass timber benefits and challenges, empowering commercial property investors and managers to make informed, strategic decisions for a more sustainable and cost-efficient future.

Why Mass Timber is Gaining Popularity

Financial Advantages & Market Performance

Mass timber is environmentally friendly and cost-effective, capable of lowering overall construction costs by 12%. It also delivers a return on investment of 15% to 20% faster than traditional methods. Some local governments offer tax incentives of up to $5 per square foot to encourage sustainable construction. Additionally, mass timber's compatibility with Leadership in Energy and Environmental Design (LEED) certification can support rental rates up to 6% higher, meeting tenant demand for eco-friendly spaces. These financial benefits, combined with potential property insurance savings through risk-reducing designs, make mass timber an attractive option for investors.

Sustainability & Lower Carbon Footprint

Many property owners opt for mass timber to reduce their buildings' environmental impact. Unlike the high greenhouse gas emissions associated with steel and concrete, mass timber retains the carbon that trees absorb during growth. Additionally, its superior insulation properties help lower energy costs, providing long-term savings on heating and cooling. Building with mass timber also fosters forest health by supporting sustainable forestry practices and reducing the density of forests vulnerable to wildfires.

Cost & Time Efficiency

Mass timber construction can significantly shorten building timelines. Its lighter weight requires less extensive foundations, and prefabricated timber components allow for faster onsite assembly, which reduces labor costs and mitigates workforce shortages. Together, these efficiencies contribute to an attractive return on investment for property owners.

Aesthetic & Market Appeal

Mass timber offers a unique natural aesthetic highly desirable in the commercial property market. Its versatility allows architects to design nature-inspired, modern spaces that attract tenants and buyers. This aligns with the growing demand for sustainable properties, which often see higher occupancy rates and leasing premiums. For investors, this appeal adds long-term value and marketability.

Regulatory Landscape & Compliance

Recent updates to the 2021 International Building Code allow mass timber structures to reach up to 18 stories, expanding their usage. Environmental certifications like LEED, Building Research Establishment Environmental Assessment Methodology (BREEAM) and the Living Building Challenge provide pathways for meeting high sustainability standards. Additionally, some states offer additional incentives for sustainable construction. This regulatory support helps future-proof investments, enabling building owners to comply with stringent environmental standards and avoid costly updates.

Smart Building Integration

Mass timber is compatible with smart building technology, offering property owners enhanced oversight of building performance and maintenance. IoT-enabled moisture monitoring systems prevent water damage and advanced fire detection, and suppression technology enhances safety. Additionally, real-time structural health monitoring and predictive maintenance systems can minimize operational risks and promote long-term structural integrity. These innovations can increase efficiency, improve safety and potentially reduce insurance premiums.

Risks You Need to Consider

Fire Hazard Concerns

Despite mass timber's fire-resistant properties, it remains combustible and can serve as fuel in a fire, potentially leading to prolonged burn times and higher temperatures. When planning a mass timber commercial project, ensure fire protection measures like fire-resistant coatings and comprehensive sprinkler systems are integrated into the design. This is particularly important for high-rise structures, where fire safety is paramount.

Water & Moisture Risks

Mass timber construction can be vulnerable to water damage if not properly treated. Issues such as leaks, sprinkler malfunctions or natural weather events can cause mold, rot and structural degradation. Implementing proper waterproofing and moisture control systems is critical to mitigate these moisture risks. Additionally, review your mass timber insurance policy to confirm it covers potential water damage and related repairs.

Post-Damage Repairs

Repairs for mass timber buildings that suffer fire or water damage can be more complex and costly compared to traditional steel or construction structures. Repairing or replacing mass timber components often requires specialized materials and expertise, which can lead to extended downtime. Ensure your insurance coverage includes provisions for the unique restoration needs of mass timber construction materials.

Construction Challenges & Workmanship

Because mass timber is a relatively new material, finding contractors with the necessary experience and attention to detail is critical. Poor construction quality can lead to significant issues down the road. Be sure to work with builders who have a proven track record in mass timber construction and implement strict quality-control procedures throughout the process.

Pest Infestation

Mass timber structures are susceptible to pest infestations, particularly termites, which can undermine their structural integrity. To minimize this risk, treat the wood with protective coatings and conduct regular inspections. Additionally, discuss with your insurance advisor whether your mass timber insurance coverage includes coverage for pest-related damage.

How Mass Timber Affects Your Insurance Policies

Fire & Water Risk Premiums

Insurance companies are adapting their models to assess the risks of mass timber. Beginning in 2025, mass timber commercial buildings will fall under a separate construction classification in the Specific Commercial Property Evaluation Schedule (SCOPES), reflecting the unique fire and water risks involved. To manage your premiums effectively, work closely with your insurance advisor to ensure your mass timber insurance coverage aligns with these risks.

Maintenance Requirements

Mass timber commercial buildings require regular inspections to monitor moisture buildup and ensure structural integrity. Insurers may require more frequent maintenance checks to help prevent long-term risks and manage insurance premiums.

Impact on Business Continuity

Damage to mass timber buildings can disrupt operations, leading to significant revenue losses. Business interruption insurance accounts for potential delays in repairing or rebuilding mass timber structures. Commercial property owners should consider how extended repair timelines could impact leasing agreements and rental income.

Mass Timber Risk Prevention & Insurance Tips

Insurance & Policy Development

• Work with your insurance advisor early to create a policy tailored to address specific mass timber risks.
• Ensure your policy includes protections for fire, water and pest-related risks unique to mass timber.

Fire & Water Risk Mitigation

• Prioritize fire-resistant coatings and install advanced sprinkler systems to manage potential flammability concerns.
• Apply moisture-resistant treatments and control systems to prevent water damage.
• Conduct regular inspections to ensure these systems operate effectively and meet insurance requirements.

Quality Control Procedures

• Use certified materials, require third-party inspections and confirm installations to support a reliable construction process.
• Treat wood and schedule regular pest inspections, especially for termite protection.

Ongoing Maintenance

• Perform regular inspections for moisture, pest activity and structural integrity to avoid long-term issues.
• Routine maintenance can help prevent costly repairs and maintain reasonable insurance premiums.

Emergency Response Planning

• Work with local fire departments on pre-planning for efficient emergency response.
• Develop recovery and continuity plans to minimize operational disruptions.
• Establish clear communication procedures with tenants to ensure safety and transparency in emergencies.

We’re Here to Help Protect Your Property

Mass timber offers exciting opportunities for property managers and business owners, with significant environmental benefits, faster construction times and a unique aesthetic appeal. However, it's important to assess both the rewards and the risks—especially when it comes to your insurance policies. If you're considering mass timber for your next project, connect with a member of our team to ensure you have the right protections in place.