2025 M&A trends in the real estate industry

Key Takeaways:

As interest rates begin to stabilise, M&A activity in real estate is picking up, though deal timelines remain lengthy and some regions still face challenges.

Logistics, retail parks, and student accommodation are thriving, while build-to-rent projects and hotel investments grow amid rising demand and evolving market dynamics.

Family offices, real estate funds, and domestic investors drive transactions, while hybrid models emerge, enabling diversified strategies and more nuanced market activity.

The real estate sector has proven its resilience amid shifting global economic conditions. While rising interest rates and fluctuating market dynamics have slowed activity in some areas, these sectors are beginning to see renewed momentum.

As M&A activity gradually returns to pre-pandemic levels, RSM specialists Josh Calvert, Associate Director – Transaction Services for RSM in the UK; Vidar Haugen, Partner for RSM in Norway; and Lenka Zdražilová, Head of Transaction Advisory Services for RSM in the Czech Republic, discuss what they have seen in the last six months, and what we can expect in the immediate future.

An uptick in M&A activity as interest rates stabilise

The lingering uncertainty of recent years appears to be giving way to cautious optimism in the real estate market. Calvert notes, “Over the last 12 months, activity has picked up quite a bit with buyers getting a little bit more comfortable funding-wise. And both buyers and sellers are getting a little bit closer on expectations around pricing.” However, while transactions are proceeding, deal timelines still remain lengthy.

Interest rates have been a driving factor in M&A dynamics. Haugen notes that, “After a period of fluctuation in interest rates towards the end of last year and the beginning of this one, things are starting to stabilise.” With this renewed sense of optimism, deal activity is starting to pick up again, Haugen added. However, despite the stabilisation, in some countries, like Norway, interest rates are still nearly the highest they have been in the last ten years. Because of this, some areas are still struggling, Haugen continues, “In the Norwegian market, the building of new homes has more or less halted due to the high interest rates, hitting the construction sector hard.”

Interestingly pension funds have emerged as significant players in the sector, driven by a pressing need to deploy collected funds. “We have seen a high volume of transactions driven by pension funds. They are becoming seen as stronger contributors to addressing investment shortfalls, particularly in sectors requiring long-term capital, such as real estate,” Haugen noted, emphasising their current role in revitalising the market.

The role of private equity and real estate funds

Private equity's presence within real estate is nuanced, often manifesting through family office investments and specialised real estate funds.

Calvert observed that many transactions have been driven by high-net-worth family offices and institutional players like pension funds. “There is a good amount of high-net-worth individuals with family offices that are driving market activity, alongside institutional funds,” he said.

In some regions, private equity activity is predominantly driven by domestic investors and companies, with foreign private equity firms viewing some markets as somewhat risky. “Here in the Czech Republic, for example, approximately 95% of all transactions are carried out by domestic private equity companies and funds, making this a defining characteristic of the market,” Zdražilová noted.

Interestingly, hybrid investment models have also emerged, with some firms spinning off real estate assets into separate entities. “In some cases, private equity structures involve industrial businesses being acquired by the private equity firm, while the associated properties are managed by a separate fund or entity focused solely on real estate investments,” explained Haugen. This setup often involves entirely different investors for the real estate assets compared to those in the private equity business and thus allows for diversified investment strategies within the same overarching business ecosystem.

Sub-sector trends

Certain sub-sectors within real estate have shown heightened activity, while others remain relatively subdued. Calvert observed, “The commercial real estate sector, particularly office spaces and hotels, has seen significant M&A activity, with a focus on acquiring the asset as well as the operations. In contrast, residential real estate has experienced less activity from an M&A perspective, though institutional investment in build-to-rent projects is growing rapidly.” Notably, major UK retailers like John Lewis are expanding into the build-to-rent market, leveraging the rising demand for rental housing driven by housing shortages.

Additionally, student accommodation has emerged as a particularly buoyant segment, with substantial development and M&A activity in recent years, reflecting strong demand and solid cash flow potential once occupied.

Similar opportunities exist within logistical and retail real estate markets. “From what we are seeing, office buildings remain a focus, but the retail park segment has shown particularly strong growth over the past year and a half,” says Zdražilová. “Logistics facilities have emerged as another robust area of activity, further strengthening the retail and industrial real estate markets,” she added.

Haugen added “Logistics, driven by the growth of online shopping, and hotels have also emerged as key areas of investment. Countries with weaker currencies in Europe have also further boosted tourism, making hotels particularly attractive to investors.”

The road ahead for M&A in real estate

Looking forward, sentiment seems to be somewhere between optimistic and cautiously optimistic. “A lot will hinge on interest rate levels,” shares Haugen, “If investors see rates declining, it’s likely to drive an increase in transaction activity. That said, 2025 appears to be shaping up to resemble pre-COVID transaction levels”.

Calvert shares a similar sentiment, “Things might take a little longer, but with buyers and sellers getting closer on price, we’re seeing a little bit more movement,” he explained.

More optimistically, Zdražilová shares, “The growth and development observed since the start of the year suggest a positive trajectory, building on the momentum of 2023 and 2024. As we look ahead, 2025 appears poised to mark a peak in activity.”

Nevertheless, the adaptability and resilience displayed within these markets indicate a promising, albeit slightly uncertain, outlook for deal activity in the remainder of the year and beyond.