2022 real estate industry M&A outlook


2022 real estate industry M&A outlook

Momentum continues, but sector matters

In 2022, real estate M&A activity will continue to be high, although it will likely be unevenly spread—the result of spillover from the 2021 sector story of “hot” versus “not.” The ability to rapidly pivot and adapt in today’s dynamic macroeconomic environment is an essential attribute of effective M&A deal teams.

A look at real estate mergers and acquisitions

The pandemic has reshaped and reprioritised where and how people live, work, and play, and their choices are exerting major influence on commercial real estate (CRE) industry mergers and acquisitions (M&A) activity. Performance measures across the industry make one thing abundantly clear: sector matters.

  • The industrial sector had a banner year, with demand for properties supporting the digital economy driving robust transaction volume and premium pricing.
  • The residential sector continued its strong and stable run, buoyed by a competitive homebuying market and increasing consumer interest in single-home rental properties.
  • The hotel and leisure sector saw early activity—showing promising signs of recovery after two challenging years.
  • Office sector M&A was down across the board due to increased uncertainty about when—or if—occupancy levels will return to pre-pandemic levels.
  • While retail M&A activity was up from 2020, consumers’ preference for online shopping, increasing vacancy rates, and higher operating costs weighed heavily on the sector.

Read more about real estate industry trends across office, industrial, retail, hotel and leisure, residential, and nontraditional sectors, and see our full real estate M&A outlook for 2022.

2022 real estate industry M&A outlook

Signs of progress in the real estate M&A landscape

We expect to see continued high levels of CRE M&A activity in 2022. Pent-up demand, ready access to capital, a low-interest environment (at least for the near term), and abundant “dry powder” should have investors clamoring for properties in the hot industrial and residential sectors, despite their rich prices.

Optimism appears to be growing for a moderate uptick in the office and hospitality sectors, and retail’s surprising fourth-quarter performance may be an indicator of better times ahead. Potential headwinds include fierce competition for scarce assets, the impacts of rising inflation and interest rates on company valuations and deal financing, and impact of escalating geopolitical turmoil on the global economy.

2022 real estate M&A drivers and trends

To adapt and grow in the future, real estate executives should consider how to address the following global and US-specific trends.

Moving forward with 2022 real estate M&A opportunities

Commercial real estate M&A will continue its momentum in 2022, although overhanging pandemic, economic, and geopolitical uncertainties may again influence sector-specific dealmaking. A large majority of CRE industry respondents to the Deloitte 2022 M&A Trends Survey expressed positive opinions about the outlook for industry fundamentals over the next 12 months, with nearly three-fourths (73%) anticipating increased transaction activity.

Industrial and multi-family residential deal volume and value will likely continue to impress, as long as high prices and asset scarcity don’t deter buyer enthusiasm. Sectors hit hard by the pandemic—office, retail, hospitality—may figure prominently in portfolio consolidations, diversifications, and conversions.

Deep-pocketed PERE firms will continue to look for buying opportunities among both premium and distressed properties. Foreign investors may add to their traditional (office) and alternative asset (industrial, multi-family) holdings.

As they formulate their 2022 M&A strategies, CRE leaders should remain alert to the impacts of higher inflation and higher interest rates. The ability to rapidly pivot and adapt in today’s dynamic macroeconomic environment is an essential attribute of effective M&A deal teams. Finally, in anticipation of increased transaction activity, companies should consider expanding their finance department capabilities and systems to strengthen performance, improve access to capital markets, and move M&A planning to action.

Look back

In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.

2021 real estate M&A outlook report

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