Real estate dealmaking is expected to see a rebound in 2025, as brokers express cautious optimism about the sector’s recovery, according to a report from consulting firm PwC. The report indicates that after a prolonged period of volatility, the real estate market is beginning to stabilise, although uncertainties on a global scale persist.
Stabilising Conditions Amid Global Uncertainties
PwC’s latest insights highlight that real estate brokers are witnessing improved market conditions. Despite this positive trend, the consulting firm cautions that the global landscape remains fraught with unpredictability. Investors are anticipated to further diversify their portfolios by delving into alternative asset classes and seeking innovative financing solutions to achieve returns that surpass traditional benchmarks.
Growing Interest in Alternative Asset Classes
As traditional real estate categories continue to attract investment, alternative classes are increasingly appealing due to their risk-weighted returns. PwC forecasts a rise in transaction volumes for 2025, fuelled by a clearer market outlook and an expanding array of investment property types. The firm notes that this prediction aligns with recent quarterly trends, reflecting a gradual recovery.
Political Factors Impacting Market Activity
Despite the optimistic outlook, PwC warns that upcoming elections in several countries and potential policy shifts in the United States, particularly under a re-elected Donald Trump, could influence market activity. The firm stated, “if significant tariffs are imposed and lead to retaliation, this could create a higher inflation environment and a stronger US dollar, potentially impacting interest rate easing by central banks and investor confidence.”
Demographic Shifts Driving Demand for Wellness Real Estate
PwC’s report emphasises that changing demographics are reshaping investment strategies, with wellness-related real estate emerging as a crucial growth area. Citing United Nations projections, the report reveals that the global population aged 80 and over is set to triple from 163 million today to 445 million by 2050. This demographic shift is driving an escalating demand across the care spectrum, from nursing homes to independent living communities, although supply is struggling to keep pace.
Innovative Solutions to Meet Growing Demand
In light of this imbalance between supply and demand, PwC explains that investors and developers are adopting new capital structures and business models. These initiatives aim to meet evolving needs while maintaining desirable lifestyles. Strategies include renovating existing apartments to be more senior-friendly and converting commercial properties into mixed-use developments that cater to age-specific housing.
Indicators of Recovery in Real Estate M&A Activity
After a challenging period marked by fluctuating interest rates, signs of stability in real estate mergers and acquisitions (M&A) began to emerge in 2024. While the first quarter recorded the lowest deal value in a decade, recovery indicators appeared by the third quarter. However, the global deal value for the first nine months of 2024 fell by 13 per cent compared to the previous year, with regional variations noted: deal values rose by 2 per cent in Europe, the Middle East, and Africa, while they decreased by 1 per cent in the Americas and dropped by 24 per cent in Asia-Pacific.
Infrastructure as an Attractive Investment Class
PwC identifies infrastructure as an especially appealing asset class, given its robust growth over the past decade. The firm references a World Economic Forum publication that outlines the reciprocal relationship between real estate and infrastructure. The rising demand for artificial intelligence is also spurring investment, not only in technology firms but in the digital infrastructure and data centres necessary to support them.
New Financial Strategies and Emerging Partnerships
Investors are increasingly pursuing co-investments with limited partners or forming joint ventures with established operators to tackle the complexities of larger projects. These endeavours often require sophisticated financing and operational expertise. PwC’s report also highlights the evolving role of the insurance sector as an alternative source of capital; private equity investors have begun to enter the sector through acquisitions and strategic partnerships, enhancing the ties between insurance and real estate.
Shifts in Ownership Structures Across Industries
Over the past decade, many asset-heavy companies have restructured their ownership models to enhance capital efficiency and boost enterprise value. This trend is now extending to various sectors, including wellness operators, renewable energy manufacturers, technology firms, and consumer brands. PwC concludes that an increase in real estate M&A activity is expected in 2025, supported by improved economic conditions, lower interest rates, and greater capital availability. However, the firm cautions that growth may be hindered by ongoing global trade tensions and other uncertainties.
