Increased teleworking could be a risk to financial stability

Economic Commentaries, News The pandemic has meant that many people have worked from home to a greater extent. If this situation continues, demand for office space could decline. The conclusions in a new Economic Commentary are that increased teleworking in itself can lead to small effects on financial stability. However, in a scenario where companies reduce their office space through more efficient use, the consequences for financial stability may be greater.

Companies in the commercial real estate sector have large loans and in recent years their loans have grown rapidly. All in all, this makes real estate companies vulnerable to disruptions that may affect their ability to pay off their loans. It also means that problems in the real estate sector could rapidly spread to the financial system.

In terms of value, offices comprise the largest part of the real estate sector. If the demand for office space were to decline, real estate companies could suffer financially as a result of higher vacancies. The Commentary concludes that there are many factors that affect the demand for office space and that it is uncertain whether increased teleworking will lead to higher vacancies. However, it is wise to investigate the consequences this might have for both real estate companies and financial stability in general right now.

If vacancies in office buildings are accompanied by lower expectations of future rent levels, this could have implications for both real estate companies and lenders. However, the assessment is that real estate companies have sufficient rental income and thus earnings to cope with such a situation. The conclusion is therefore that the risks to financial stability are small, a from more people working from home. If, however, companies reduce their office space through more efficient use of the premises, this may, through higher vacancies and poorer key ratios, lead to financing challenges for property companies. In such a situation, this could lead to substantial risks to financial stability.


Authors: Gustav Alfelt, Niclas Olsén Ingefeldt and Martin Regnér, work in the Financial Stability Department of the Riksbank. 

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Updated 20/04/2022