Kommersiella Fastighetshyror och Finansiell Stabilitet
In recent years, global organizations safeguarding financial stability has started to track commercial property markets. One of the reasons for this refers to the fact that commercial property constitutes a large share of bank lending. Simultaneously, bank exposures to commercial property are extensive and risky since collateral values are strongly correlated to borrowers cash flows. Since banks are viewed to play a key role for financial stability, studying the relationship is well motivated. To better understand how commercial property markets interact with financial stability, this paper develops an econometric model for studying the commercial rental market. The model is used to simulate dynamic reactions caused by a chock to the demand for office space (employments). On the basis of the simulations, the paper calculates how Net Present Values and Net Operating Incomes of a hypothetical property holding are affected through the dynamics on the commercial rental market. The results indicate that Net Operating Incomes and Net Present Values are strongly affected by a contraction of employment levels. The results also indicate that leveraged property holdings likely are more affected by a contraction in the demand for office space. In conclusion, it seems as if dynamic analysis of the commercial property rental market may contribute to the understanding of the relationship between commercial property markets and financial stability.