Swedish real estate managers are expected to demonstrate solid operational performance in 2026, with limited downside risk to occupancy supported by strengthening economic fundamentals, according to a report published by Nordic Credit Rating today. However, we anticipate rental growth will remain subdued due to limited contribution from CPI-indexed contracts, while operating cash flows are expected to benefit from higher occupancy in cyclical segments such as offices. The economic recovery and increased tenant demand are underpinned by stronger household purchasing power and expansionary fiscal policy.
With an improved economic outlook, we expect inflation to approach the Swedish central bank's long-term target of 2%. We anticipate an interest-rate hike by end-2026, with a possible additional increase in 2027. We expect short-term improvements in issuers' interest coverage, driven by refinancing of debt on improved terms. However, we anticipate issuers' long-term average interest rates and net interest coverage to remain around current levels.
"Some listed issuers may see their credit quality weaken in 2026, driven by increased debt from intensified efforts to narrow the gap between book values and share price through buybacks and capital-efficient growth," said NCR credit analyst Gustav Nilsson. "As a result, we believe some issuers may experience increased interest rate sensitivity if an interest rate hiking cycle begins."
Property values are expected to rise slightly in 2026, supported by stronger cash flows. The transaction market will likely be driven by premium-valued, institutionally backed real estate managers, while discounted listed issuers prioritise capital-efficient growth.
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com