The Rising Cost of Currency Hedging and Its Impact on U.S. Commercial Real Estate Markets

Contributors

Will McIntosh
Global Head of Research

John Kirk
Senior Director, Research

Mark Fitzgerald
Senior Director, Research

July 2018

71% of foreign investors hedge their currency risk from cross-border investments.

When investing in U.S. real estate, foreign investors must decide if they should hedge currency risk. In fact, a 2016 survey by INREV (European Association for Investors in Non-Listed Real Estate Vehicles) found approximately 71% of survey participants hedge their currency risk from cross-border investments.1 More recently, however, an increasingly volatile currency environment, combined with historically low interest rates in many countries around the globe (relative to the U.S.) has caused hedging costs to rise to abnormally high levels. Consequently, both foreign and domestic investors are questioning the impact hedging costs could have on the U.S. real estate markets.

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