Life insurance companies have recently become hesitant to provide capital for commercial property developers, as tens of billions of dollars in office loans come due this year. According to The Wall Street Journal, this retreat is bad news for building owners at a time when other lending sources are scarce.
Insurers have slowed or stopped making office loans due to rising vacancy rates and falling rents caused by the growing popularity of remote work and return-to-office rates that are still below pre-pandemic levels. A February survey by Goldman Sachs Asset Management found that 15% of insurers with commercial real estate lending businesses plan on reducing their activity in 2021 – more than three times as many compared to the same survey last year.
The outlook appears grim for office building owners seeking life insurance company funding amid increasing loan maturities this year. With other traditional lenders also becoming scarce, it may be difficult for these entities to secure adequate financing options going forward
