Many insurers have expressed their concerns regarding the state of the commercial real estate (CRE) market in 2024 as growing geopolitical tensions and global inflation may eventually cause a major downturn, a report released by Gallagher Re outlined.
Providing a macroeconomic outlook of the market, as well as recessionary scenarios, the report noted how the possible downturn of the market may cause a recession as housing and real estate play an important role within the economy.
Insurance companies were found to have an average investment range from 9% to 12% in the CRE market in their portfolios - through both direct and indirect investments in mortgages, bonds, and directly owned real estate. European insurers were found to be investing 7% of their portfolios, while those in the US were investing about 12%.
The report pointed out that the trends suggest a downward revaluation of the legacy assets of insurers, with firms likely to reevaluate their strategies when it comes to relative exposures to CRE.
The report also noted how regions’ CRE markets were being affected by the current social and macroeconomic trends differently. Despite the possibility of some countries experiencing a recession sometime this year, CRE was likely to be stable in some markets according to data and current forecasts. In the US, productivity appears to be thriving despite the stagnation in the EU. Meanwhile, the housing market in China is experiencing concerns relating to CRE.
There were also additional factors impacting CRE trends such as employment, with the post pandemic period, as well as the rise of remote working set ups, leading to an increase in vacancies in offices found at the center of cities. However, the construction sector has remained resilient, was driven by a rise in productivity, property prices, and persistent low unemployment figures.
