Calculating on Currencies: How Does Currency Affect Office Market Real Estate Returns?
Cross-border investment in real estate raises the question of movements between the currency of the country in which the real estate assets are located and the home currency of the investor. Should investors hedge, or is the strength of the currency in a foreign location all part of the attractiveness of overseas real estate investment?
With the synchronisation of GDP movement during the global financial crisis and the similarity of yields in core office markets in gateway cities, perhaps currency strength as a result of policy from central banks and governments is now a differentiator on where to invest in real estate. The tensions in the euro zone, the safe-haven status of the US dollar and the strength of the Japanese yen have shifted the relative positions of currency exchange rates.
Here we demonstrate the returns available to real estate investors in CBD grade A office stock, on a one-year total return basis and over a five-year annualised period, in eight major