On 25 January 2023, the European Systemic Risk Board (ESRB) issued a recommendation on vulnerabilities in the commercial real estate sector in the EEA. The ESRB has also published a report entitled Vulnerabilities in the EEA commercial real estate sector. The ESRB recommends that EU and Member State competent authorities improve the monitoring of systemic risks stemming from the commercial real estate (CRE) sector. The ERSB notes that the CRE sector is currently vulnerable to cyclical risks related to heightened inflation, a tightening of financial conditions limiting the scope for refinancing existing debt and taking new loans, and the pronounced deterioration in the growth outlook following Russia’s invasion of Ukraine. Vulnerabilities related to structural changes include the impact of climate-related economic policies, such as stricter building standards, and the shift towards e-commerce. In addition, the COVID-19 pandemic has accelerated the demand for flexibility in leasable office space as remote and hybrid working models have become more widespread. Also, the ERSB analysis shows that adverse developments in the CRE sector can have a systemic impact on the financial system and the real economy.