Multifamily and industrial real estate in the U.S. is headed for a bear market amid a broad pullback from the property insurance sector. According to a new report from Gallagher, the aftermath of record losses in the property insurance sector in 2023 is making insurers increasingly selective about writing and renewing policies for these assets and is even prompting insurers to find new ways to diversify risk.

New housing construction reached a 36-year high in 2023, with builders completing 440,000 apartments, according to data from the U.S. Census Bureau. Of these units, 81%—approximately 356,400—were built with wood framing, which insurers have viewed as higher risk for many years. However, the current state of the market, coupled with increased exposure to fires resulting from remote work, has soured insurers' appetite for underwriting these types of multifamily properties.

"As the hard property market eases, most asset classes are receiving risk-adjusted property rate increases ranging from flat to +10%," the report said. "We have observed underwriters rewarding office assets with strong rent rolls and low crime scores, with ranges from flat to -5%."