After dropping in 2020, real estate M&A ramped up significantly in 2021

In a significant rebound, M&A values in real estate rose sharply in 2021. Deal value rose to US$121.7 billion, a sharp increase of 229 percent compared to 2020. Deal volume rose by 79 percent to 70 transactions.

Consolidation in the real estate investment trust (REIT) space was a major driver of activity throughout the year. This trend was already evident pre-pandemic but has accelerated since. The biggest deal of the year was one such transaction: Realty Income's acquisition of VEREIT for US$17 billion. The deal brought together two net lease-focused businesses and allowed them to spin off all their office property assets into a new REIT.

Tech takes over

As in other sectors of the economy, the real estate sector is seeing the immense value of telecommunications and technology assets. Three of the top-five largest real estate transactions of the year involved investments in technology.

KKR and Global Infrastructure Partners' US$15.3 billion acquisition of CyrusOne, American Tower's US$9.5 billion tie-up with CoreSite and the US$8 billion investment by Blackstone in QTS Realty are the most prominent examples of this trend in 2021. All three targets were REITs holding data center properties—an area of intense interest among investors, as demand for data storage and connectivity has risen with accelerating digitalization and the use of big data across industries.

It seems likely that appetite for assets that support accelerating digital adoption, such as data centers, will continue through 2022.

Return to retail and leisure

As the economy continued to re-open through 2021, consumers returned to leisure activities that were less available or largely off-limits in 2020. Indeed, the second-largest deal of the year demonstrated renewed interest in leisure assets. The US$16.6 billion deal saw hospitality and entertainment-focused REIT VICI Properties buy MGM Growth Properties, which owns large-scale casino and hotel assets, including the MGM Grand and The Mirage.

As the COVID-19 pandemic enters its third year, some retail businesses are seeing a way forward toward growth in spite of persistent headwinds. Indiana-based Kite Realty's US$4.5 billion acquisition of Illinois-based Retail Properties of America is an example of this. Both parties to the transaction operate open-air shopping centers, which according to Kite have performed well during the pandemic. The company also cited the rise in curbside pickup for online orders as a growth area when announcing the deal.

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