Commercial Real Estate Rebound Expected

MetLife Inc., the largest U.S. life insurer, said there are signs of a recovery in the commercial real estate market after property values dropped about 40 percent from their peak.

“We have seen a pick-up in office-leasing activity compared to last year, and hotel occupancies are starting to improve,” Chief Investment Officer Steven Kandarian said today in a conference call. “We believe commercial real-estate valuations have bottomed out.”

MetLife is benefitting from a rebound in its investment portfolio after posting three quarterly losses last year when assets declined. The New York-based company posted first-quarter profit of $835 million yesterday, the most since 2008, as holdings backing insurance policies gained in value.

MetLife has about $35 billion in commercial mortgages and more than $16 billion in securities backed by such loans. Kandarian joins Larry Zimpleman, chief executive officer of Principal Financial Group Inc., in saying the market may be improving.

“Smart capital is starting to queue up” to invest in commercial real estate, Zimpleman said this week in an interview at Bloomberg headquarters in New York. “Prices have now sort of bottomed out and have actually started to slowly move back up again.”

REF: Bloomberg