News release

Could REIT M&A be on track for a record year?

JLL Capital Markets M&A and Corporate Advisory team sees positive signs that M&A activity is rebounding 

June 22, 2021

CHICAGO, June 22, 2021 – REIT M&A activity has totaled $70 billion year-to-date, putting it on track to be a record-breaking year as companies emerge from the COVID-19 pandemic. JLL Capital Markets’ M&A and Corporate Advisory group’s latest M&A and Strategic Transactions Monitor report shows how the positive themes in the public capital markets space are contributing to this M&A surge.

“The record in this economic cycle was set in 2006 when REIT M&A volume reached $103 billion for the year,” said Steve Hentschel, head of JLL M&A and Corporate Advisory. “REITs have enjoyed a strong run in 2021, up almost 22 percent, which is contributing to a rebound in M&A activity.”   

During the last year, REIT sub-sectors like retail, office and hospitality underperformed in-favor of sectors like industrial, data centers and life sciences by 24 percent, but the trend changed in November of 2020. With vaccine rollout and an improvement in the economy, these previously out-of-favor stocks are showing significant gains. For example, the retail REIT sub-sector has shown a 46 percent gain year to date in 2021, with office at 16 percent and hospitality at 17 percent. Collectively, gateway multi-housing, hotels, malls, offices, shopping centers and gaming REITS have made a strong comeback, outperforming the previously in-favor sectors by 14 percent.

“We are seeing this cyclical rotation among the previously out-of-favor sectors, and it’s a positive message to broader real estate that everything is starting to improve,” said JLL Managing Director Sheheryar Hafeez. “The expectations of ‘back to normal’ economic activity is leading investors to bet on these sectors rebounding."

Also, most major REIT sectors are trading at a premium to net asset value (NAV), which occurs when the market price on the exchange-traded REIT is above analyst expectations of NAV. Retail and hotel REITs have had the highest positive change in their cost of capital. From February 2020 to June 2021, the REIT sector-level change in the premium to NAV shows retail, hotel and office outperforming other sectors. A premium to NAV generally implies a green light for REITs to pursue growth opportunities, including M&A.

When JLL M&A specialists analyzed all data across the REIT space over the last 15 months, a theme emerged regarding recent REIT capital issuances pointing to increasingly attractive cost of capital. Since February 2020, REITs raised more than $28 billion in equity and over $88 billion in unsecured debt and, despite recent headlines regarding rising interest rates and volatility in the equity capital markets, REITs have not been negatively affected, which may be counter intuitive at first glance. As good inflation hedges, REITs are benefiting from rising inflation, and data supports this theme. This means the cost of equity and debt for REITs is likely cheaper today than what it was in 2020 and REITs are in a healthy spot to take advantage of markets re-opening to pre-COVID levels.

Though the broader market news seems to be focused on the uptick in volatility across capital markets driven by chatter around rising inflation, REITs to date have been resilient performers with a more favorable outlook today than during the depth of the COVID-19 pandemic.

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether investment sales advisory, debt placement, equity placement or a recapitalization. The firm has more than 3,700 Capital Markets specialists worldwide with offices in nearly 50 countries.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 91,000 as of March 31, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit