2023 Commercial Real Estate M&A Outlook

Real estate transaction volumes and amounts fell drastically worldwide in 2022. Several macroeconomic factors contribute to this decline, including rising interest rates, the Russia/Ukraine conflict, and the increase in energy prices.

However, the commercial real estate mergers and acquisitions market, presented two contrasting halves of the year:  An initial surge followed by a sudden decline later in the year as interest rates rose and inflation took hold.

To obtain insights for 2023, the current report examines the overall behavior of the real estate market, the commercial real estate M&A, and different sectors distribution.

2022 Key Findings:

• Deal amount declined to 3,500 transactions in 2022 from 4,000 transactions in 2021, a 12% drop. Volume fell to $352 billion in 2022 from $560 billion in 2021, a striking 37% tumble.

• A decrease of approximately 20% in the volume of M&A transactions in the real estate sector globally - this decline can be attributed to high debt levels and market uncertainty.

• The leading sectors in terms of transaction volume of commercial real estate M&A were rental housing and office buildings. In the United States, for example, these sectors experienced a double-digit increase in monthly rental rates.

Expected 2023 trends include:

1. ESG factors will take hold

2. Alternative sectors likely will become more mainstream

3. Alternative sectors likely will become more mainstream