Insurance companies in Germany are increasingly relying on real estate as an investment.
Of the 30 leading companies in the industry, 63 percent want to increase the share and the rest want to keep it constant.
This emerges from the trend barometer on real estate investments of the insurance industry presented on Wednesday, for which the consulting company EY Real Estate held personal discussions with representatives of the insurance companies in May.
The survey gives the real estate quota in the portfolio at 11.5 percent, which is the highest value since the beginning of the annual survey in 2008.
Compared to the previous year, the rate has increased by 0.8 percentage points and has almost doubled within ten years.
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The real estate business remains lucrative regardless of the consequences of the corona pandemic and an economic downturn. As the most popular asset class of the surveyed insurance companies, residential real estate has overtaken the previous leader in logistics this year. For living, 67 percent indicated a strong investment focus and 29 percent indicated a mediocre focus. For logistics, it is 67 percent with a strong focus and 17 percent with a moderate focus. This is followed by infrastructure and healthcare properties.
However, as a result of the trend towards home offices, only 21 percent indicated a strong focus and 41 percent indicated a mediocre focus for investments in offices. A few years ago this was the main investment goal. "The office space requirements will be completely different in the future," says Dietmar Fischer, partner at EY Real Estate and author of the study. “From our point of view, this trend is irreversible.” He explains that companies such as the Walldorf-based software group SAP let their employees choose where they want to work. This means that the office obligation no longer exists, at least in part. Fischer expects that other companies will also regulate this in the same way. As a result of the Corona, he speaks of the fact that demand is shifting to pandemic-resistant types of use. Fits to,that in the survey also retail and hotels are only slightly in the investment focus, which still appear behind the office space.
The "Biden Effect"
Overall, Fischer sees real estate investments for insurance companies as indispensable in the low interest rate environment in order to keep guaranteed interest promises - even if the guaranteed interest rate falls again at the beginning of next year.
The companies surveyed expect a total return for this year of 4.7 percent for direct real estate investments, which make up the majority at 60 percent, and of 5.6 percent for indirect investments, for example by fund companies.
In addition to Germany as the most popular location, foreign real estate is moving more into the spotlight.
The United States of America is attracting more attention than before.
Fischer speaks of the "Biden effect" and attributes the demand to the change to a new president.
For the insurance companies surveyed, sustainability and thus the ESG criteria also play a stronger role (“environmental”, “social” and “governance”).
95 percent assume that sustainable investments, in addition to the ecological and socially positive effects, pay off financially when they are resold.
A lack of evaluation standards and a lack of valid data are still hurdles for this.
Insurance companies are recognizing increasing competition in the search for real estate deals.
In addition to their own industry, they see above all private investors and family offices as co-bidders, which they also displace.
However, Fischer does not yet recognize any indicators of a bubble in the real estate market.
Fischer sees the price increase, especially in the big cities, as a market economy development due to the demand.