Hail Is Becoming A Real Estate Problem, Not Just An Insurance Problem

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Baseball-sized hail used to read like a weather oddity. In March, it looked more like a balance-sheet issue.

In Kansas City, storms dropped hail as large as 4 inches across parts of the metro, with the worst damage concentrated in the Northland. In the Chicago region the same week, a supercell produced giant hail in the Kankakee River Valley, including a stone measured at more than 6 inches that could set a new Illinois record. These were not edge-case rural events. They hit major Midwestern metros with deep inventories of apartments, office buildings, retail centers, and industrial properties.

That matters because hail has quietly become one of the most consequential weather risks facing commercial and multifamily real estate. The damage it causes is rarely cinematic in the way tornadoes are, but it is broad, expensive, and operationally disruptive. Roof membranes get punctured. Facades and glazing systems take hits. Skylights fail. Exterior HVAC equipment is exposed.

Water gets in where it was never supposed to, and what begins as a repair can quickly become a tenant issue, an insurance issue, and then a capital planning issue. Cotality’s 2026 Severe Convective Storm Risk Report makes the case that severe convective storms are no longer a secondary concern but one of the main drivers of insured property losses.

For real estate owners, the most important insight in the report is that hail risk is no longer just about geography. It is about exposure density, asset value, and the specific physical characteristics of buildings. Cotality estimates that more than 43.5 million U.S. properties, representing about $17.8 trillion in reconstruction cost value, fall into moderate or greater hail-risk categories.

Illinois stands out as a hidden giant, and the Chicago metro ranks ahead of Dallas-Fort Worth in total reconstruction cost value exposed to hail, with about $1 trillion at risk. Kansas City, St. Louis, Minneapolis, and Denver also sit in the mix as Midwestern markets with meaningful concentrations of real estate near major storm corridors.

That framing should sound familiar to anyone in commercial real estate. A storm does not need to flatten a tower to create a major loss. It just needs to damage enough expensive square footage at once. Hail is particularly effective at doing that because it spreads across wide swaths of metro areas and tends to strike the parts of buildings owners already struggle to inspect and maintain consistently.

On an office or multifamily asset, a hail event can trigger immediate roofing work, but the more important costs often arrive later through leaks, mold, tenant claims, equipment failure, and deferred occupancy. What looks like exterior damage can quickly become an interior revenue problem.

Jon Schneyer, director of research and content at Cotality, said the real vulnerability is often “less about the ‘type’ of property (commercial versus residential) and more about specific components within the structure itself.” He pointed to “roof age and brittleness,” “roof-mounted equipment,” and “building envelope materials” as the kinds of factors that can sharply increase loss severity. For commercial buildings in particular, he noted that “roof-mounted equipment, skylights, siding, and roof systems” can add materially to the damage total.

That is especially relevant for multifamily owners. Apartment operators are already dealing with higher insurance costs, aging suburban stock, and tenant sensitivity to disruptions. A hailstorm that damages roofs, windows, and condensers across a garden-style portfolio can create simultaneous unit turns, resident complaints, and emergency mitigation work.

The report notes that damaging hail of 2 inches or greater hit more than 600,000 single- and multifamily homes in 2025, with a combined reconstruction cost value of $177 billion. Texas led the nation, but Wyoming, Oklahoma, Wisconsin, and Kansas were also heavily affected. The broader point is that multifamily owners should stop treating hail as an isolated maintenance event and start treating it as a portfolio operations risk.

Office owners face their own version of the problem. Many older office assets, especially those being considered for repositioning or conversion, were not built for today’s insurance environment. When a marginal building takes a hail hit that damages roofing, glazing, or mechanical systems, it can force a capital decision ownership was hoping to delay. That is what happened in Kankakee, where First American Bank said it would close and sell its 15,000-square-foot branch after a March hailstorm severely damaged the property.

CEO Thomas E. Wells IV said the storm destroyed the roof and rooftop HVAC equipment, caused water damage inside, and left the bank facing at least $500,000 in repairs and a timeline of roughly nine months. Instead of repairing an already underused building, the bank chose to merge the branch into a nearby location and sell the property as-is.

That matters in a market where office values are already under pressure and many buildings are being underwritten less for stable operations than for redevelopment potential. A property that was barely financeable before a storm can look even less attractive after one, especially if it already has deferred maintenance or outdated materials.

The insurance market has been responding to that reality for some time, and Schneyer said the shift is becoming more granular. “We’re seeing underwriters move toward ‘by-peril’ ratings instead of broad territory ratings,” he said, a change that ties insurance costs “more directly to the specific risk of an individual property” and prices hazards like hail, wind, and flood more distinctly. That may sound technical, but for real estate owners it has a practical implication: the days of relying on a market’s general reputation for weather risk are fading. The building itself matters more.

This is where hail becomes more than a weather story. It becomes a due diligence story. Buyers, lenders, and asset managers now have to think more carefully about roof age, roof type, prior claims history, facade vulnerability, drainage, and the location of exterior equipment. They also need to think about timing.

One of the more useful points in the Cotality report is that recovery delays can dramatically inflate losses. When claims teams are overloaded and contractors are scarce, a damaged roof does not stay a roof problem for long. Rain enters, mold spreads, interiors are affected, and the claim grows. That dynamic is just as relevant to a 300-unit apartment community or a suburban office campus as it is to a single-family home.

The report’s more forward-looking point is that resilience is moving closer to the center of real estate decision-making. Schneyer said that “leveraging the latest physical risk scores and long-horizon climate risk scenarios can inform multi-year capital planning and mitigation decisions.” He added that proactive mitigation, including “more resilient roofing and protective upgrades to vulnerable exterior equipment,” can reduce future losses. Cotality also argues that every dollar invested in resilience can save about six dollars in future recovery costs.

The recent March storms in Kansas City and Illinois should be read as a warning. Giant hail is arriving early in the season, striking large metros, and exposing a category of risk that real estate owners still tend to underestimate. The market has spent the past few years focused on hurricanes, wildfires, and floods, for good reason.

But in the middle of the country, hail may be the more immediate threat to property performance. It does not need to make a building uninhabitable to damage NOI. It just needs to trigger enough repairs, enough insurance friction, and enough operational disruption all at once. That is increasingly what it is doing.

The smart response is not panic. It is repricing and preparation. Owners should be auditing roofs and exterior equipment, reviewing insurance language, updating reserve assumptions, and prioritizing impact-resistant materials where replacements are already planned. In commercial and multifamily real estate, hail is no longer just part of the weather. It is becoming part of the underwriting.

As Schneyer put it, “resilience is no longer a nice-to-have, it’s a business imperative.”

Source: Propmodo