Real Estate Industry

Q3 2022: Mergers and Acquisitions Trend Report

Industry Overview

• The Real Estate Industry’s largest transactions in Q3 2022 occurred in the Real Estate Investment Trust space. Prologis Private Capital acquired Logistics Portfolio for $1.5 billion
• The overall outlook for the Real Estate Sector is cautious optimistic as rising interest rates, increase in inflation, exacerbated geopolitical situation, declining gross domestic product (GDP), sinking deal flows and taking a long-term approach to real estate assets
• Key players of Real Estate industry are Lennar corp, D.R.Horton and, Pultegroup
• The number of industry enterprises has decreased by 2.4% per year to 64,221 in 2022, while employment has increased by 0.2% per year to 180,218 workers

Key Industry Trends

• Trends that continue to grow in the real estate sector are ESG, infrastructure spending, & digital transformation, and consumers are willing to travel post pandemic and expect growth in the hospitality with revenue generated per available room approaching pre-pandemic levels in 2022
• In the Hospitality sector, guests are prioritizing safety and good customer service whether that’s sustainable travel and tourism or authentic local flavors
• After the pandemic’s recovery, structural changes in lifestyle preferences will continue to shape functionality, and capital investment has grown more selectively as the surge in demand seen across all real estate sectors last year

Recent M&A Transactions

Historical Performance

• Despite significant revenue growth, earnings fell in 2022 from 6.8% of revenue in 2017 to 4.2% of revenue as a result of higher lumber prices during the time and new businesses’ attempts to capture the market with price competition
• Over the past five years, the Housing Development Industry revenue has increased at an annualized rate of 3.5% to $231 billion, including anticipated decline of 6.5% in 2022 due to 120% increase in unemployment rate in 2020 alone

Future Industry Growth

• Growth in the new housing construction market is expected to contract over the next six years to 2027, compared to growth within the six years to 2022
• Interest rate hikes may stymie home affordability and hamper demand for housing, which are expected to rise at an annualized rate of 8.0% over the five years to 2027, carrying the momentum of a 69.2% hike in 2022 alone