Real estate, once considered a reliable inflation hedge, requires diversification within the asset class to mitigate risks and boost exposure. Re/insurers still show interest, despite challenges like rising interest rates, bankruptcies, and vacant commercial buildings. The UK and EU remain active in the real estate market, with examples like Pension Insurance Corporation's funding of sustainable waterfront apartments. While real estate offers income growth and potential alignment with inflation, it is not a perfect hedge and specific property selection is crucial due to variables like tricky tenancies and rent negotiations.

ESG considerations are a top concern for insurance investment teams, with efforts underway to address challenges posed by the SFDR framework. European real estate shows signs of improvement, but downside risks remain in the short term. However, a projected rebound in capital values and total returns is expected post-2024. Insurers with immediate allocation requirements may find opportunities in private real estate debt, given upcoming refinancings of low-interest loans. Prudent decision-making is crucial amidst ongoing market volatility and ESG concerns in the real estate sector.