(Bloomberg) -- Evidence of falling prices in Sweden’s commercial real estate sector is starting to pile up as landlords slash the valuations of their portfolios. 

On Wednesday Wallenstam AB, one of the Nordic country’s largest listed property firms, and its smaller rival, Heba Fastighets AB both wrote down their property assets, adding to proof the industry is facing stark times as borrowing costs rise faster than their ability to raise rents. 

A majority of property owners in Sweden expect prices to fall across office, retail and residential buildings in 2023, according to a survey published by business organization Fastighetsagarna. Deep declines in values could trigger a “domino effect,” as rising collateral requirements could force distressed selling, an adviser to Sweden’s financial regulator has warned. 

Wallenstam, which focuses on commercial real estate and homes in larger cities like Stockholm and Gothenburg, saw its portfolio lose 3 billion kronor ($284 million) of value in the fourth quarter to 62.6 billion kronor. Meanwhile Heba marked down its property portfolio by about 4% for 2022, and on Monday peer Fabege AB also had to lower its real estate values. 

“An uncertain and cautious property market and higher interest expenses have resulted in increased yield requirements,” Chief Executive Officer Hans Wallenstam explained in the earnings report of the company founded by his father. “We are clearly in the midst of a system change, where all actors in the market must get accustomed to operating in a high inflation environment after many years of low inflation.”

--With assistance from Niclas Rolander.

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