Pandemic raises concerns over office investments, prompts switch to warehouses

Since businesses adopted flexible working measures, offices have become risky investments 

Generic interior of a warehouse. PetinovSergeyMihilovich/Shutterstock

According to the executives at Goldman Sachs Asset Management (GSAM), global insurers are now considering increasing their investments on commercial warehouses over office spaces since the pandemic has forced employees to work remotely, reported Channel News Asia.

The executives from GSAM’s arm that handles investments for insurers’ portfolios said that the outbreak has accelerated insurers’ need to switch from “undesirable” real estate investments, which also includes retail properties like storefronts, for commercial warehouses.

Lockdowns during the outbreak have prompted companies to consider their need for office spaces if their employees should continue working remotely post-pandemic, which could potentially reduce office occupancy rents and rates.

Moreover, concerns over the virus have escalated the demand for commercial warehouses as most businesses transition to e-commerce sites and consumers avoid going to physical shops.

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Mike Siegel, global head of GSAM Insurance Asset Management, said that the pandemic has accelerated the commercial real estate trends in the past few years, but he also addressed the difficulty that comes with unloading certain assets like mortgages during the outbreak to make the transition.

He added that insurers are constantly keeping an eye on their real estate investments and are trying to manage through it all. “They are not going to sell unless they feel they can get good value.”

Mike explained that they would have to sell the investments into funds that purchase distressed investments, but they are currently trying to avoid this since distressed funds obtain risky holdings on the cheap, with hopes of turning these into profit.