As the COVID-19 pandemic enters its third year, the disruptive effect of the global crisis is still on the minds of real estate executives, according to a recent study by Ernst & Young. More than one third (36%) of real estate executive respondents from commercial, residential and investment firms, say the pandemic caused short-term disruption to the industry, but a significantly larger portion—59%—indicated that the pandemic undoubtedly transformed the industry permanently. This percentage is more than 2.5x higher than global respondents across all business sectors.
What’s more, on the heels of a hotbed of M&A activity in 2021, respondents expect a considerable shift in such activity this year. Less than half (39%) of real estate executives expressed their own intent to explore M&A opportunities this year, which is 20% lower than other business sectors.
Behind the numbers:
To understand why M&A activity will decline, the study also probed respondents to capture these findings:
- More than half (52%) of respondents said they expect a slower year for M&A activity.
- Two-thirds, however, expect hostile bidding practices this year.
- Almost half (49%) expect to see more “megadeals” that exceed $10 billion.
- 83% of executives are adjusting global operations or supply chains to manage geopolitical risks, logistics costs and uncertainty.
- Most (90%) of real estate executives and construction executives (96%) cite input prices as a key challenge.
- Nearly a quarter of respondents (22%) said they will be dedicating their M&A focus to increasing operational capabilities.
- Even though 2021 was a record year for M&A, it was also a year that saw plenty of deals fall through, with 75% of respondent reporting they had a deal fall through.
For more information, visit: https://www.ey.com/en_us/ceo/ceo-survey-2022-real-estate-m-and-a-highlights.