2023 commercial real estate M&A outlook

A look at real estate mergers and acquisitions

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 (CRE) industry mergers and acquisitions (M&A) activity. Performance measures across the industry make one thing abundantly clear: sector matters.

• The industrial sector now is viewed as largely recession-proof by many industry observers. That may be true for existing facilities, but the fate of new construction is less clear.
• Residential assets, including apartments and single-family rentals, will likely continue to do well. Among the reasons: the ability to pass along inflationary cost increases in annual rent hikes, a strong overall employment trend despite tech- and entertainment-industry layoffs, and households that appear eager to remain independent.
• We expect REITs to reenter M&A as rates stabilize or drop, but private REITs are in a different position. While we don’t foresee private REITs fading in coming years, it’s possible that non-traded REITs will face heightened regulatory hurdles in 2023 or soon afterward.
• Office sector performance will depend largely on where buildings are located and how updated their amenities and sustainability profiles are. While pandemic-era dust has not yet settled on the work-from-home model, it seems likely that business has returned to normal, but not to the office. With low enough prices and/or sufficient government incentives, Class B or C buildings potentially could be converted to affordable housing.

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 2023.