There were concerns at the beginning of 2024 that the Commercial Real Estate (CRE) market could be heading for a major downturn.
Insurance companies are major investors in Commercial Real Estate, with US and European insurers having approximately 12% and 7% of their investment portfolios invested in this sector, respectively. The potential for a recession, and especially for one driven by Commercial Real Estate, has raised some concern for both life and non-life carriers.
In this report, Professor Ricardo Reis, considers the current social and macroeconomic trends that are impacting the Commercial Real Estate market across different regions.
Key Findings:
- Globally, Insurers have between 9-12% exposure to the Commercial Real Estate (CRE) market through both direct and indirect investments, in mortgages, bonds and directly owned real estate.
- COVID-19 and the rise in working from home has resulted i a dramatic increase in city centre commercial real estate availability. This trend shows no sign of reversing.
- Recessionary headwinds remain light with a healthy US economy and an EU that is stagnant but not contracting. China remains strong in absolute terms despite a decline in growth relative to the recent past.
- Banks have steadily been increasing their investment and extending lines of credit to Commercial Real Estate. This has helped explain how the sector has remained buoyant through challenging times.