German insurers are becoming more and more hesitant when it comes to real estate investments. The real estate share in the overall insurance industry portfolio has reached a new high of 12.1 percent in 2021. But in the current environment, companies are becoming more cautious. This is the result of the latest “Real Estate Investment Trends Barometer”, for which the consulting firm EY surveyed the managers of 30 insurance companies.
After all, half of the insurers would like to increase their share of real estate even more. However, the year before, two-thirds said they were pursuing such plans. Five percent of the participants even want to reduce their real estate fee right now. The 13-year upward trend in real estate insurance premiums seems to be weakening. North America is also overtaking Europe as the most attractive investment destination for the first time. Germany appears less attractive as an investment location for 95 percent of respondents due to its dependence on energy imports from Russia.
Patience is the need of the hour.
“Currently, insurance companies are very hesitant in the real estate market,” explains Jan Ohligs, partner at EY Real Estate and author of the study. They did not fully question their investment strategy. However, in the current volatile environment of inflation, interest rate hikes and war in Ukraine, patience is the order of the day. “With sustainable transformation, an urgent and long-term challenge is also moving up the agenda and leading to a realignment of the insurance industry’s investment strategies,” says Ohligs.
Already 95 percent of survey participants consider weather risks and transient risks in their investment strategies. A large majority (90 percent) also believe that sustainability has a positive impact on resale value in addition to the ecological effects of lower emissions. However, more than half of those surveyed (55 percent) are not fully aware of the financial gaps that will arise as a result of necessary energy-related renovations. 95 percent perceive the lack of valid data as a major challenge when implementing ESG strategies.
Residential real estate remains in the spotlight
Residential properties that were already favored by insurance companies in the previous year are again the focus of 95 percent of respondents (2021: 96 percent). Investments in infrastructure and logistics real estate also remain popular (75 and 63 percent), but are slightly less attractive (2021: 84 and 79 percent). Investors’ old favorite, office property, may regain some ground (now 75 percent vs. 62 percent in 2021). (in the)