Voya’s Michaud Comments On Shift From Office/Retail To Multifamily/Industrial Real Estate Investing
A.M. Best reports, “Greg Michaud has an admittedly unscientific yet simple way to describe what happened to the commercial real estate investment market at the end of 2022.” Voya’s head of real estate finance says, “It just froze,” describing how “his team did about $3 billion of business in the first six months of the year, followed by about $500 million in the second half.” He adds, “I’ve never seen a year that’s been that volatile.” Best’s Review says the COVID-19 pandemic and rising interest rates triggered a “fundamental shift” in the markets, “specifically as to how insurers view commercial real estate investments and which classes attract the most interest.” A.M. Best associate director Jason Hopper says, “Insurers have been moving away from office and retail for a couple of years now, focused more on multifamily and industrial.” He blames inflation and interest rates as the two biggest factors, a conclusion that Michaud does not entirely endorse. Michaud argues, “It was 100% interest rates. Initially what you get as interest rates jump is that people pull back, because all of these owners of property thought they were going to sell it at a low capital rate. Buyers are now unsure where rates are going. I don’t necessarily think interest rates have to drop to make the market move but they have to stabilize.