Nordic Credit Rating (NCR) said today that rent levels for Swedish office properties are likely to come under pressure due to the continuing economic impact of COVID-19 and reduced demand due to the widespread success of remote working. The agency added, however, that it is currently difficult to assess the precise impact on long-term rent levels and property managers' earnings.
In an attempt to provide some insight into the prospects for the office management sector, NCR looked at the likely impact of declining rents on two key credit metrics, net interest coverage and net debt/EBITDA, in four possible scenarios.
"Sweden's office property sector is generally quite robust and will be able to withstand moderate changes in rent levels," said NCR credit analyst Marcus Gustavsson. "However, a large and sustained decline in rents would have a material effect on net interest coverage and net debt/EBITDA, especially on companies with higher leverage."
Furthermore, a significant and sustained decrease in rents could affect market values and loan-to-value ratios significantly, possibly resulting in covenant breaches for companies with higher leverage.
If you have any questions, please contact:
Marcus Gustavsson, credit rating analyst, +46700442775, firstname.lastname@example.org
Mille O. Fjeldstad, credit rating analyst, +4799038916, email@example.com