2025 Outlook

Global M&A Trends in Real Estate

Global M&A Trends in Real Estate hero image
  • Insight
  • 10 minute read
  • January 28, 2025

New ways in which investors and users interact with the built environment will spur real estate M&A activity in 2025.

Tim Bodner

Tim Bodner

Global Real Estate Deals Leader, PwC United States

Real estate dealmakers are cautiously optimistic about 2025 and eager to get deals done. Against the backdrop of a global real estate deals environment that is evolving—in response to changes in interest rates, anticipated shifts in trade policies and broadening capital sources, among other factors—global capital flows and investors’ return expectations and capital allocation strategies are also evolving. As a result, we believe investors will continue to expand into alternative asset classes and look for creative financing solutions to achieve returns that exceed established standards and benchmarks.

Traditional real estate asset classes—office, retail, industrial and multifamily—will continue to receive capital and see deal activity where it makes sense. But we see returns in alternative asset classes in the real estate ecosystem as more attractive than traditional asset classes on a risk-adjusted basis. These alternatives include variations on traditional asset classes that are influenced by how users interact with their built environment. Examples include mixed-use developments adjacent to sports venues and manufacturing facilities, as well as retail spaces that are transformed into mixed-use developments with age-restricted housing. Some of the alternatives are tied to digitalisation, deglobalisation or demographics, among other factors. This includes the wellness trend, which we spotlight further below.

‘Alongside the traditional real estate asset classes, we are seeing a surge in new alternative investment possibilities that provide higher returns. I think these will become increasingly important to dealmakers and the investment community in 2025 and beyond.’

Tim Bodner,Global Real Estate Deals Leader, PwC US

Deal volume (that is, the number of announced property transactions) in 2025 is expected to outpace recent transaction volume because of increased certainty in the market and the broadening of investible real estate asset classes—an expectation that recent quarterly trends support. In the first quarter of 2024, global real estate deal values for traditional real estate asset classes were $217bn, the lowest level in over a decade. Central banks’ sharp increases of interest rates starting in 2022, after years of near-zero rates, sent real estate values tumbling from their peak of $840bn in the fourth quarter of 2021—a year which saw global M&A reach record levels driven by the pandemic. However, by the third quarter of 2024, deal values for traditional real estate asset classes started to rise again, reaching $253bn, indicating that the real estate M&A market may have bottomed out. Deal volumes nonetheless remained subdued: in the first nine months of 2024, the number of transactions averaged 7,649 per quarter, a 4% decline compared to 7,982 per quarter the prior year.

Central banks have created greater certainty for lenders and investors as they have switched to a rate-cutting mode, and we expect an upward trend in deals throughout 2025 on the back of this movement, alongside the continued push into alternative asset classes. Regression analyses undertaken by leading investment banks, such as Morgan Stanley and Goldman Sachs, and alternative asset managers, such as KKR, indicate that double-digit increases are likely.

Uncertainties that could affect M&A activity persist, however, tempering our optimism. These include a complex geopolitical environment—with elections in 2025 in a number of countries and anticipated changes to influential US public policies on issues such as trade, immigration and taxes following the re-election of Donald Trump—along with continued economic strength in the US and other parts of the world. If significant tariffs are imposed and lead to retaliation, this may result in a higher inflationary environment and a stronger US dollar and potentially affect interest rate easing by central banks, putting pressure on underwritten returns and investor confidence.

Spotlight on wellness

  • The wellness trend is attracting investors seeking portfolio diversification.
  • Recent M&A activity and strategic partnerships in wellness-related real estate make this a sector to watch.

Investors seeking to broaden their portfolios are identifying and capitalising on emerging asset classes. One example is wellness-related real estate. We expect increasing investor interest in this subsector in response to demographic changes and evolving consumer preferences. According to the Global Wellness Institute, the wellness-related real estate subsector is expected to grow at a 15.8% CAGR over the next three years and exceed $900bn in value by 2028. This will have implications for the entire commercial and residential real estate industry. Given the close ties between wellness and consumer preferences and the desire for enhanced experiences, this wellness trend is especially relevant in the residential, hospitality and leisure sectors.

An immediate indication of the enduring characteristics of this theme is the growth in wellness-oriented residential sectors, especially in senior housing. It’s no longer enough to simply have suitable accommodation—consumers are increasingly seeking high-quality living environments with design elements that promote holistic wellbeing and encourage social interaction.

The focus on wellness within the hospitality sector has already begun to grow. The hotel and travel industries are experiencing a robust increase in wellness-oriented services, with luxury wellness retreats leading the trend.

In the post-pandemic environment, consumer and industry awareness of how external environments can affect physical and mental wellbeing is driving demand for these retreats. For example, Therme Group, a developer of wellbeing resorts, plans to expand further in Europe as well as in the UK, North America, Asia and the Middle East. In December 2024, Therme announced the acquisition of Therme Erding, a wellbeing destination in Germany. The Well, a New York-based wellness club, partnered with hospitality group Auberge Resorts Collection to add wellness spaces to some of Auberge’s global locations. And the Maybourne Hotel Group has partnered with two prominent wellness experts to create an exclusive wellness offering.

As the wellness sector continues to evolve, we expect it to attract substantial investor interest and present opportunities for those looking to diversify their investment portfolios. The sector’s alignment with long-term demographic and health trends ensures its prominence in future investment strategies. Investors may want to focus closely on this theme.

Spotlight on senior housing

  • A nascent M&A trend in the US could ripple outwards to other markets.
  • Non-traditional participants strategically reposition themselves in senior housing.

According to the United Nations, the global over-80 population is projected to almost triple from 163 million today to 445 million by 2050. In response to this demographic change, there is increased demand for housing across the care spectrum, from nursing homes to independent living communities. However, there is a global imbalance between this demand and the available supply of senior housing. This gap is primarily due to hesitancy among developers to commit to projects because of challenges such as limited access to affordable financing, local labour shortages and rapidly rising construction costs. Additionally, the diverse preferences and lifestyles within the ageing population require the industry to offer a range of housing options and quickly adapt to emerging trends, including the wellness trend discussed earlier.

To address these challenges, investors, developers and operators are creating innovative capital structures, operational models and projects that enable users to maintain the lifestyle they have been accustomed to while being able to access more care if needed. Strategies range from retrofitting existing apartment buildings to make units senior-friendly and leasing them on a multi-year basis, to transforming retail spaces into mixed-use developments with age-restricted housing. Senior housing assets will need to be outfitted with the appropriate equipment and amenities. These include features such as accessibility, safety and proximity to medical services. Senior housing will also need to respond to a growing preference in some regions for ‘ageing in place’, in which older adults are able to continue to live safely, independently and comfortably in their own home and community.

Success in this sector requires developers, capital partners and operators to embrace innovation and strategic positioning. By aligning closely with consumer preferences and leveraging real estate market trends, they can effectively capitalise on opportunities in the senior housing market.

We have begun to see announcements of US transactions involving the nascent trend of senior housing portfolios being acquired by public real estate investment trusts. We are also seeing strategic repositioning by non-traditional senior-housing market participants as they evaluate how to evolve their business models to capitalise on this trend and remain responsive to changing consumer preferences. Examples of M&A activity include Welltower’s acquisition of a portfolio of adult communities in February 2024 and Ventas’ acquisition of a 20-asset senior housing portfolio in November 2024. To unlock value and take advantage of demographic trends, investors will need to find developers who can meet the wellness and experiential demands of potential tenants and find financing sources willing to originate creative capital structures.

XX%

of respondents said the residential sector is likely the one in which they will be active or plan to be active in Asia Pacific in 2025.

Source: PwC and the Urban Land Institute’s Emerging Trends in Real Estate® Asia Pacific 2025 report

Global M&A volumes and values in 2024

After several tough years marked by an unpredictable interest rate environment, M&A in real estate showed signs of stabilising in mid-2024 amid easing interest rates and improved deal economics for many. Although the first quarter of 2024 saw a ten-year low in terms of deal values, by the third quarter of 2024 there were signs of recovery—but not enough to make up for the first half of the year. As a result, global deal values declined by 13% in the first nine months of 2024 compared to the same prior year period.

Trends in deal values varied by region. In Europe, the Middle East and Africa (EMEA), deal values increased by a modest 2% in the first nine months of 2024 compared to the same period in 2023. By contrast, deal values in the Americas and Asia-Pacific declined by 1% and 24%, respectively, over the same period.

Asia-Pacific dominated in terms of overall deal values, with $325bn (46%) of deals announced in the first nine months of 2024, compared to $250bn (35%) in the Americas and $138bn (19%) in EMEA. Because real estate is heavily influenced by local market conditions, trends often vary significantly across countries in a region and even across towns and cities within the same country. For example, in South Korea and Australia, 2024 volumes increased by 25% and 14%, respectively, in response to changes in interest rates and increased confidence from institutional investors, while deal volumes in Japan and China declined by 9% and 5%, respectively. In Europe, volume was significantly affected by the perceived risk from political volatility, especially in Germany and France, where deal volumes declined by 8% and 35%, respectively.

65%

of real estate investors expect their firm’s profit to be ‘good’ or ‘excellent’ in 2025—20 percentage points higher than last year.

Source: PwC and Urban Land Institute (ULI) Americas’ Emerging Trends in Real Estate® 2025 Report, October 2024

Key themes driving M&A activity in 2024

Convergence of real estate and infrastructure

Infrastructure has displayed an impressive growth trajectory over the past decade, making it an especially attractive asset class. New ways in which investors and users interact with the built environment are leading to a convergence of real estate and infrastructure dealmaking, a relationship that the World Economic Forum described as reciprocal in their December 2024 Reimagining Real Estate publication. AI for example is attracting investment not just in AI companies, but also significantly in the data centres, digital infrastructure and power generation capabilities required to support it. The investment needs in the digital infrastructure space have supercharged deals activity in data centres, but investor interest also extends to traditional infrastructure, other digital-related assets such as fibre and towers, and assets tied to shifting supply chains such as manufacturing facilities.

Deal structuring, financing and operations have evolved to facilitate this convergence. Investors are seeking opportunities to develop and operate their own facilities, which often take the form of co-investments with limited partners, or to create joint ventures with established operators. These typically involve a co-investment component in which the investor acts solely as a capital provider. For example, in March 2024 Digital Realty and Mitsubishi Corporation announced a joint venture focused on developing data centres. Digital Realty has been using a strategy of acquisitions and joint ventures to scale capacity and expand its platform into new markets across the world.

The nature of infrastructure deals, including the significant investment required, necessitates a sophisticated approach to financing which leverages different types of capital at different stages of the project. For example, opportunistic capital may be used during the development phase, after which stabilised assets might be sold to a different vehicle with a core strategy, or possibly (following the US model) as asset-backed securities.

Previously, investors were reliant on market changes to create returns, but now they are actively managing their investments and identifying opportunities to supplement their real-asset portfolios with operational expertise. In this increasingly competitive investment market, to achieve desired returns, investors need a sophisticated approach to financing and identifying the appropriate operational teams and partners. These dynamics illustrate just how quickly the real estate industry is evolving. And it highlights the importance of real estate to the functioning of the global economy.

$379tn

was the value of global real estate in 2022—more than all equities and debt securities combined—making real estate the world’s most significant store of wealth.

Source: World Economic Forum’s Reimagining Real Estate Insight Report, December 2024

Insurance capital

The insurance sector has been playing an increasingly important role as an alternative source of capital as investor fund allocations shift from real estate assets to infrastructure and other asset classes. Private capital players have entered the insurance sector through acquisitions or strategic relationships. Examples include Apollo’s investment in Athene and KKR’s acquisition of Global Atlantic, both of which have continued to scale rapidly, along with similar financial vehicles sponsored by others, such as Blackstone and Brookfield. These vehicles were created as a way for private capital firms to access long-term capital at a time when higher interest rates put pressure on returns. Essentially, they unlocked new lending capabilities at a more favourable cost of capital.

These relationships with insurance companies are critically important for the real estate industry at a time in which some traditional financing sources have reduced their allocations to the industry. However, the insurance capital dynamic is broader than this. Some market participants believe owning assets within insurance companies creates more value than owning them in traditional real estate structures, and they have restructured the ownership of portfolios in response—in some cases, concluding that they should run a global real estate investment business moving forward.

All of this goes to show just how complex the operating environment is, how industry sectors continue to converge and how important real estate is to market participants. We expect to see more activity in this space as it continues to have a material impact on the real estate industry.

Evolving business models

Over the past decade, some companies with significant real estate assets have elected to change the ownership structure of their businesses for the purpose of improving capital efficiency and increasing enterprise value. We have begun to see this trend in other sectors, as companies shift from asset- and capital-intensive balance sheets to asset-light operations.

Early movers included hospitality brands such as Hilton and La Quinta who spun off owned hotel assets into separate public hotel real estate investment trusts. Others, such as Wyndham and Marriott, separated their hotel and timeshare assets into separate companies though spin-offs. Meanwhile, gaming operators such as VICI Properties and Gaming and Leisure Properties spun off their owned casino assets into separate publicly traded gaming real estate investment trusts.

Looking forward, other sectors that we expect to pursue this path include wellness industry operators, renewable energy manufacturers, technology companies and consumer brands. Private equity, sovereign wealth funds and foreign pension funds can serve as an ‘off-ramp’ for these assets and create long-term investment opportunities which capitalise on macroeconomic and demographic trends. 

Key actions for real estate dealmakers in 2025

In 2025, we expect to see a rise in real estate M&A activity driven by favourable economic conditions, lower interest rates and available capital. This growth may be tempered by global trade and other uncertainties. At the same time, we note the rise of a number of alternative asset classes which yield higher returns. Successful dealmakers will navigate this evolving landscape adeptly and employ advanced strategies to structure and finance deals with the right partners.

Our commentary on real estate M&A trends is based on data from industry-recognised sources, from PwC and the Urban Land Institute (ULI) Americas’ Emerging Trends in Real Estate® 2025 report, and from our own independent research. Global and regional real estate transaction values referenced in this publication are for non-development properties with a value of at least $10m based on data through 30 September 2024 provided by MSCI Real Capital Analytics. Certain adjustments to source data have been made to align with PwC’s industry mapping. All dollar amounts are in US dollars.

The value of global real estate in 2022 is based on the World Economic Forum's Reimagining Real Estate: A Framework for the Future insight report by K. Bracken and S. Chandan, dated December 2024, accessed on 13 January 2025.

Tim Bodner is PwC’s global real estate deals leader. He is a partner with PwC US. Haley Anderson is a director with PwC US. Anh Pham is a senior manager with PwC US. Both Haley and Anh work in PwC’s real estate deals team.

The authors would like to thank the following colleagues for their contributions: James Broadley, Andy Cloke, Richard Garey, Marco García Guerra, Mario Alberto Gutierrez, Michio Ikeda, Jason Leung, Gareth Lewis, Rachel Smith and Steven Weisenburger.

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