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  • Writer's pictureRealFacts Editorial Team

How Dollar Strength Can Affect Industrial Commercial Real Estate

A commercial real estate work site

Since the onset of the pandemic, the landscape of industrial commercial real estate (CRE) has been significantly influenced by factors such as supply chain disruptions and foreign exchange dynamics. Understanding how a strong dollar affects industrial CRE is crucial for investors and developers navigating this complex market.

The pandemic-induced supply chain disruptions highlighted the challenges posed by global manufacturing and distribution networks. The scarcity of building materials and increased transportation costs underscored the importance of reshoring manufacturing operations. However, for industrial CRE professionals, keeping up with foreign exchange issues, particularly the strength of the dollar, is as essential as monitoring interest rates.

The strength of the dollar has a profound impact on various industries, especially those involved in international trade. A stronger dollar makes it more expensive for customers abroad to purchase goods from the United States, while simultaneously reducing the cost of imported products for U.S. firms. Conversely, a weaker dollar makes U.S. goods more affordable internationally but increases the cost of imports.

Steven Blitz, managing director of global macro and chief U.S. economist at GlobalData.TS Lombard, points out that the current monetary policy, including higher domestic interest rates, strengthens the dollar. This creates a scenario where foreign investors seek dollar assets to capitalize on higher returns, thereby increasing demand for the currency.

As long as the dollar remains strong, companies may hesitate to reshore manufacturing operations due to concerns about being overpriced compared to competitors. However, a strong dollar may encourage increased imports, leading to higher demand for warehouse space and benefiting the logistics segment of industrial CRE.

Therefore, monitoring foreign exchange markets becomes essential for industrial CRE professionals. Understanding the implications of dollar strength allows investors and developers to make informed decisions regarding reshoring initiatives, warehouse demand, and overall market trends.

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