(Bloomberg) -- The chief executive officer of Castellum AB warned that the rental market will weaken more as the Swedish landlord reported that the value of newly signed contracts was lower than terminated leases in the fourth quarter.

“The property industry has a tough year behind it, and we should expect a weaker rental market going forward,” CEO Joacim Sjoberg said in the company’s earnings report, cautioning that more tenants — consisting of Swedish businesses and the public sector — may be impacted by a waning economy. 

The struggle for Swedish real estate firms has so far mostly centered on refinancing debt due to higher funding costs — while rental income and profits have been at stable levels. However, the fact that Castellum’s net letting came in at negative 51 million kronor ($4.8 million) in the final quarter of 2023 “could be a sign of some operational weakness,” Danske Bank credit analyst Marcus Gustavsson said in a note. 

Sweden is widely expected to enter a recession this year and bankruptcies have already climbed to the highest level since the 1990s. That is also being felt by Castellum, which had a negative effect of 59 million kronor in 2023 from tenants going bust, with padel halls accounting for one third of the amount. 

Read More: Sweden Holds Grim Warning for the $4 Billion Padel Craze

Furthermore, the company reported a decline in value changes totaling 6.3 billion kronor ($596 million), or 4.3%, in the fourth quarter due to higher yields. Castellum’s share price fell as much as 4.7% when trading started in the Swedish capital on Wednesday. 

Read More: Swedish Watchdog Warns of More Pain for Property Firms, Banks

©2024 Bloomberg L.P.