Erik Thedéen, Director General of Finansinspektionen (FI), spoke at the Öresundsmarknaden conference about FI’s view on the commercial real estate market.
"Good access to cheap credit for a long period of time has made it possible for commercial real estate firms to acquire properties at increasingly higher prices by taking larger and larger loans. As a result, the commercial real estate sector currently has a high level of debt compared to its cash flow and earnings, and thus is very sensitive to higher interest rates," opened Erik Thedéen.
"Interest rates and credit spreads are now rising, and commercial real estate firms must manage more challenging financing conditions. This is the start of a necessary adjustment that can lead to a more stable real estate sector in the long run," continued Thedéen.
"The industry needs to realise that the interest rate environment has changed and review its actions to mitigate risks. In the long run, this entails a number of adjustments," said Thedéen.
FI would like to see the commercial real estate firms consider the following:
This can make the real estate industry more stable and thereby also contribute to financial stability," concluded Thedéen.