Swedbank: Commercial Real Estate Outlook: Eased financing situation; economy nears recovery
The situation has eased for Swedish commercial real estate companies now that rate cuts have been implemented and given that additional cuts are planned. The Swedish economy is expected to make a strong recovery in 2025 and 2026, which will benefit the sector, according to Swedbank's report Commercial Real Estate Outlook.
"After a couple of challenging years, the pressure on the real estate sector has eased. With lower interest rates, the risk sentiment in the market has improved significantly, and real estate companies' key figures have stabilised," says Mattias Persson, Group Chief Economist, Swedbank.
From an international perspective, Swedish banks have high exposure towards commercial real estate. Thanks to highly favourable credit quality, strong capital positions and good profitability, they are able to absorb any credit losses that may arise in the sector.
"Swedish banks have among the lowest levels of credit losses in Europe, and they are also among the banks with the highest profitability, which means that they have buffers for potential losses," says Mattias Persson.
The Swedish economy is expected to recover in 2025 and 2026, which will benefit commercial real estate companies. However, there is concern that consumption - which is expected to drive growth in Sweden - will not pick up if households remain cautious even when their purchasing power gains strength in the future.
"As the wait for the economic recovery continues, some vulnerabilities remain. For example, the situation could be tougher for older office properties in less attractive locations and for retail properties, if the upturn in consumption is delayed," says Mattias Persson.
For the full report, see attachment or visit: Swedbank - Sektoranalyser (https://www.swedbank.se/privat/spara-och-placera/analyser-marknad-omvarld/swedbank-insikt/makro/sektoranalys.html) (English version is available).