Life insurance companies have recently become more 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 who are struggling to find other lending sources.
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 remain at around half their pre-pandemic levels. A February survey by Goldman Sachs Asset Management revealed that 15% of insurers with commercial real estate lending businesses plan on reducing activity in 2021 – a threefold increase from the same survey last year.
The lack of reliable financing options has created an uncertain future for many office building owners, particularly those whose loans are coming due soon.
