Skanska, a Swedish developer that is building new office projects in several U.S. markets, is paring back its growth plans in the country due to slower-than-expected leasing.

“In the near future, we will be very, very cautious and postpone further growth of the business in the U.S.,” Skanska Executive Vice President Claes Larsson said on a webcast Wednesday, first reported by Bloomberg.

The weak office market and declining property values led the company to incur impairment charges of 2 billion Swedish krona, or $195M, it announced Tuesday.

“Back-to-office rates are very low in the U.S.,” Larsson said on the webcast. “So [there is a] big hesitation among tenants to expand or sign up for new space. We’re lagging behind in leasing compared to what we assumed when we started a lot of the projects.”

Over the last year, Kastle Systems' Back to Work Barometer has hovered around 50% of pre-pandemic levels in the 10 major U.S. cities it covers.

“Secondly, you have, of course, the high-interest-rate environment in the U.S.,” Larsson added.

The Federal Reserve steadily raised interest rates over 18 months, though it has kept rates at 5.25% to 5.5% at its last three meetings and is expected to start lowering rates this year.

The Swedish development company is one of a limited number of developers that have been constructing new office buildings in recent years amid a pandemic-induced slowdown.

The company has two active office projects in the D.C. metro region: 17xM, an 11-story trophy building downtown that is set to deliver this year, and the nine-story 3901 Fairfax in Arlington, Virginia, which topped out last spring.

Also under construction is The Eight, a 25-story Class-A office in Bellevue, Washington, built speculatively, and 1550 On The Green, a 28-story office tower in Houston.

In addition to its development business, Skanska also has construction, civil construction and program management divisions. A Skanska spokesperson told Bisnow it is still in active growth mode for those three businesses, despite halting its development growth. 

UPDATE JAN. 11, 10 A.M. ET: This story has been updated with additional information on Skanska’s business lines.