Life Companies Shun Office Building Owners with Loans Coming Due

Article originally posted on HERE on April 19, 2023

Life insurance companies, until recently a reliable source of capital for commercial property developers, are shunning office building owners as tens of billions of dollars in office loans come due this year. The Wall Street Journal reported that the retreat by insurers is bad news for building owners at a time when other lending sources have all but dried up.

Many insurers have slowed or stopped making office loans, executives and analysts say, interrupting life companies’ decade-long expansion into commercial property lending. Insurance firms have become skittish about rising vacancy rates and falling rents, reflecting the growing popularity of remote work and return-to-office rates that are still around half of pre-pandemic levels.

A February survey by Goldman Sachs Asset Management found that 15% of insurers with commercial real-estate lending businesses plan to reduce their activity this year, more than three times as many in the same survey last year.