Pimco Prime Real Estate is sharpening its focus on older office buildings in cities where insurance remains available and affordable, while quietly stepping back from markets where extreme weather has already made coverage hard to obtain. The strategy reflects a blunt internal rule: the firm will not buy a building that cannot secure insurance on viable terms.
Climate Risk Now A Deal Breaker
Raphael Mertens, chief sustainability officer at Pimco Prime Real Estate, told Bloomberg that the portfolio he oversees is avoiding markets where failure to prepare for extreme weather has already undermined access to insurance. Places to avoid include much of Florida and California, as well as parts of Asia in which property insurance is now unavailable, he said. "We would never buy a building that can't find insurance," Mertens said.
Instead, Pimco Prime is directing capital into older, well‑located offices that it believes can be upgraded to meet higher standards for climate resilience and energy performance. The unit of Pacific Investment Management Co., which manages about $85 billion for parent Allianz Group, is increasing the number of renovation projects in its pipeline after receiving fresh capital from Allianz.
It is also considering acquiring additional properties that fit this "brown‑to‑green" profile, with decisions on whether to hold or sell renovated assets made on a case‑by‑case basis, depending on market conditions and client needs.
Mertens said the investor is focusing on geographic markets where local policies and public investment already support climate resilience. The thinking is that cities that are actively preparing for extreme weather, and where regulators are tightening environmental and energy rules, are also more likely to remain insurable over the long term.
Cities Pimco Still Likes
On the positive side of the ledger, Mertens cited Paris, Munich, Sydney and New York as cities Pimco Prime continues to favor. He said these markets "have already invested sufficiently in climate-risk countermeasures," making them more attractive for a strategy that depends on both physical resilience and ongoing access to insurance. At the same time, he noted that the firm is not writing off Florida and California entirely.
Even in those high‑risk states, Pimco Prime is searching out pockets where climate risk is judged acceptable and coverage is still available. For example, the firm has invested in Waterford Business District, a business hub near Miami that it owns together with Nuveen.
In California, Mertens said Pimco Prime has invested in properties in San Francisco, Palo Alto and Irvine, after concluding that "none of these assets are exposed to significant wildfire or other climate-related risks."
The approach aligns with a broader market trend in which investors and lenders are increasingly using insurance as a filter for where they allocate capital. If premiums spike or coverage disappears, the business case for owning a building can come apart quickly, especially when policies renew every one or two years.
Regulations And Rising Premiums
Pimco Prime's push into out‑of‑date offices that can be upgraded is unfolding against a backdrop of tougher rules and escalating climate‑related costs. Across major economies, regulations are pushing landlords to cut emissions and improve building performance. In the UK, a recent report warned that large parts of central London "risk obsolescence" if owners fail to carry out major green refurbishments. That has helped spur brown‑to‑green activity among firms such as Blackstone, Brookfield Asset Management and Henderson Park Capital Partners.
Even in the United States, where the Trump administration has vilified green policies, some investors are still allocating capital to decarbonization strategies in commercial real estate. Galvanize, the alternative investment manager co‑founded by Tom Steyer, said last month that it expects higher energy prices to support its own brown‑to‑green CRE strategy.
The financial stakes are significant. A 2025 study by First Street Technology estimated that property values in the US alone could drop by up to $1.5 trillion over the next 30 years if landlords do not adapt their assets to climate change. The same research found that premiums for US commercial properties have climbed more than 150% in less than a decade.
In Europe, less than a quarter of losses from natural catastrophes are covered by insurance, and in some countries the figure is below 5%, according to a recent estimate by the European Central Bank.
Mertens said many owners and investors still underestimate how quickly climate risk is changing, even though "insurance needs to be renewed every one or two years" and weather patterns are "becoming more and more extreme." For Pimco Prime, that has translated into a clear priority: buy aging offices only in cities that are serious about climate resilience and where insurance markets still function, and avoid those where extreme weather has already choked off viable coverage.
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