2024 commercial real estate M&A outlook has been saved
Perspectives
2024 commercial real estate M&A outlook
Extreme resilience
In 2023, commercial real estate mergers and acquisitions (M&A) hit the pause button. Lending for commercial real estate projects tightened, exacerbating an already dry environment for those seeking financing. Toward the end of 2023, however, the storm clouds began to part. Take a look at what the implications are for real estate M&A in the year ahead.
A look at real estate M&A
The pandemic has reshaped and reprioritized where and how people live, work, and play, and their choices are exerting major influence on commercial real estate M&A activity. Performance measures across the industry make one thing abundantly clear: sector matters.
- If interest rates continue to moderate, real estate M&A may begin to look more valuable to investors, boosting valuations and narrowing the bid-ask spread so that more transactions can take place.
- Roughly $929 billion in commercial mortgages will come due in 2024, so lenders and borrowers will need to work together to address any shortfalls that may occur.
- Private equity firms are sitting atop more than $2 trillion in cash, with increasing pressure to deploy it. Between this capital and the ability to raise large funds, these firms are likely well positioned to take more assets private this year. However, until markets open up in earnest, they may continue to explore deal targets or structures that haven’t traditionally been on their radar, such as those in the infrastructure space.
- Like other emerging tech companies, proptechs saw their pipeline of venture capital funding dry up amidst a struggling market for initial public offerings. Smaller proptechs looking to exit in 2024 may pivot to acquisition via private equity, a real estate investment trust, or a larger proptech company. However, this strategy might be challenging for companies not yet generating cash from operations.
Read more about the emerging trends in real estate across office, industrial, retail, hotel and leisure, residential, and nontraditional sectors—and see our full real estate M&A outlook for the upcoming year—in our 2024 Commercial Real Estate M&A Outlook.
2024 real estate M&A trends
To adapt and grow in the future, real estate executives should consider how to address the following global and US-specific expectations.
Powering ahead
2024 is shaping up to be a transition year. Between an uneven global economy and competing pressures across the US, the stage is set for a myriad of different outcomes to take place within commercial real estate M&A. Will we see an end to the dealmaking slump? Possibly. Either way, if you wait until the M&A market fully heats back up to dive in looking for deals, you’ll likely find yourself at a disadvantage.
To stay alert and on top of the market moving forward, consider reviewing and adjusting your strategy on a regular basis so that you can flex quickly should an unexpected opportunity or roadblock arise. Otherwise, given how significant the volume of deal analytics can be, there’s little downside to setting aside time now to determine the capacity and capabilities you’ll need for the number of deals that interest you. On top of that, be sure your teams have a solid grasp of potential tax legislation, controversies, data capabilities, and ESG matters—as well as how they could affect the underwriting of the deals you’re considering.
Generally, it’s always a good idea to make sure your assets are as profitable as possible, which includes reducing expenses, keeping the tenants you currently have, and boosting the efficiency of your back-office processes—which can often be done by embracing technology. Therefore, don’t shy away from exploring how emerging technologies could help boost your bottom line and enable you to scale up more efficiently.
After two straight years of declining fundamentals, real estate capital markets may have reached a market bottom. Now, how industry leaders respond could determine the trajectory for 2024. By establishing a solid base of operations, organizations can better position themselves to improve their resilience in the face of uncertainty, effectively positioning themselves to be more decisive and close better deals.
Looking back on 2023
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.
Take a look back at the real estate M&A activity and trends that reshaped the sector in our 2023 outlook.
Get in touch
Nathan Florio
Advisory Principal | Deloitte Transactions & Business Analytics
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Real Estate - Perspectives, Insights, and Analysis
Deloitte's US Real Estate industry practice is a recognized leader in providing audit, tax, consulting, and financial advisory services to the commercial and residential real estate industries.
