Insurers dive into warehouses and dump office space

An annual survey of insurers' investments conducted by Goldman Sachs Asset Management (GSAM) has found that global insurers want to increase investments in commercial warehouses as their stakes in office space are becoming riskier.

During the current coronavirus pandemic, work from offices has shifted to work from home and a large number of employees now work remotely.

According to a report by Reuters the pandemic is hastening a shift among insurers to exchange ‘undesirable’ real estate investments, which also include retail properties, such as store fronts, for investments in warehouses.

The survey findings say that pandemic lockdowns have spurred companies to re-examine their need for office space if employees continue working at home in the post-pandemic world, a trend that could drive down office occupancy rates and rents. With lockdowns and social distancing becoming the norm in the current environment, the demand for warehouse space has also increased as business moves to e-commerce sites and consumers avoid making trips to brick-and-mortar stores.

GSAM insurance asset management global head Mike Siegel said that commercial real estate trends during recent months are accelerating because of the pandemic, but it is difficult for insurers to unload troublesome real estate assets, such as mortgages, during the pandemic in order to make the switch.

He said the insurers are monitoring the impact on their real estate investments and are trying to ‘manage through’. “They are not going to sell unless they feel they can get good value,” he said.

Source: Asia Insurance review