Key takeaways

  1. Debt markets stabilised in Q4 2022, and senior lending terms for prime properties in Copenhagen were similar to Q3.  
  2. Copenhagen reports the lowest senior loan margins for prime properties: 90 bps for offices and retail; 125 bps for logistics.
  3. Rating agencies expected to continue downgrading the number of bond issues – however, this is already priced in the current credit spreads and will have minimal impact.
  4. Nordic banks are extremely well capitalised and have among the lowest credit default swap spreads globally – hence there is no sign of over leverage, and we expect capital markets to continue to function well.
  5. Lenders are likely to remain selective in what they finance. Investors may need to inject additional equity or subordinated debt to refinance assets, given changes in values and loan terms. 

Inflation in the last decade has been at a very low level in the US and Europe. On the back of the great financial crisis in 2008 (GFC), central banks have been very active in providing amble liquidity in markets. And we have experienced a period of record length of low rates. As observed by Bloomberg’s Index of Negative Yield, late 2022 was the first time in more than five years where no fixed income debt classes had observable negative yields. Thus the landscape has changed significantly during 2023.

5y swap rates rose more than 300 bps. This had a very direct impact on real estate transactions where all-in debt costs increased significantly, and leverage was reduced further to satisfy ICR hurdles.

The current forward rates curve indicates that rates will peak in 2023 in conjunction with an expected recession in the Euro area. We see some tail risks in the current pricing where potential ripple effects on inflation do not seem to be priced adequately in the current curve. Also viewed by several macro hedge funds being actively taking on bets of higher inflation for longer. 

However, it will be a positive factor for the real estate markets in the Nordics that rates are expected to tighten, also providing a positive sentiment for further investments. In Q4 2022, lending terms for prime office properties remained in many locations, similar to the previous quarter. Lending terms for retail and logistics indicated contrasting trends in Europe while lending terms for multifamily stabilised in Q4. 


Real estate companies and funds face a number of challenges in the years to come. The most leveraged entities could face challenges breaching covenants on debt driven by either a lower ICR or higher LTV. However, leverage is much lower than we saw in 2007-08.

Further, Moody’s latest Nordic Real Estate report estimates that SEK 300bn of corporate bonds issued by real estate companies need to be refinanced in 2023-24. However, it should be noted that the companies’ cash position is relatively strong and almost 50% of the nominal amount that needs to be refinanced is cash equivalents on the companies’ balance sheets. Our view is that private debt markets (banks + insurance + debt funds) combined with the public bond markets will function well and absorb the refinancing need.

Lastly, the capital position of Nordic banks is strong. This can be clearly seen by the CDS (credit default swaps) of the Nordic banks, which are lower than European banks in general. This will also put less pressure on banks’ appetite for lending to CRE and margins.

Outlook real estate debt markets 2023


  • Yield gap narrowed
  • Financial covenants (LTV, ICR)
  • Liquidity in public bond markets challenged
  • Cost of debt increased
  • Expected downgrades (already priced in)
  • Refinancing risk / Maturity wall


  • Leverage significantly lower than GFC
  • Nordic banks well capitalised and funding spreads lower than rest of Europe
  • Hedging has mitigated mark-to-market losses on CRE
  • Cash position of public real estate companies