Investors looking to position for a 2025 uptick in M&A activity have many sectors to choose from. Real estate, including REITs, is a credible contender to experience more consolidation activity next year. That could put the spotlight on an array of ETFs. The actively managed ALPS Active REIT ETF (REIT ) should be part of that conversation.
REIT’s primary investment objective isn’t to own real estate investment trusts (REITs) that are rumored takeover targets. But the ETF’s status as an active fund can support holdings-level quality. That’s pertinent because some financially sturdy real estate firms could be attractive targets.
JLL’s latest M&A and Strategic Transactions Monitor explores various themes that could loom large in the real estate sector in 2025. That includes the intersection of increased shoring up of balance sheets and takeover activity. There are also attractive valuations across the sector. So it’s possible REIT and related ETFs could be hotbeds of takeover speculation next year.
Improving Outlook Supports REITs Case
Several factors could augur well for REIT heading into 2025. Those include growth catalysts and easy access to capital markets for real estate developers and landlords.
“In relation to private capital markets, similar themes are occurring with asset valuations largely stabilizing, yields beginning to compress and institutional capital becoming increasingly active. All of this is occurring in lockstep with construction starts slowing putting increased pressure on future supply,” according to JLL.
Another potential selling point for REIT is real estate consolidation activity could have significant breadth across the sector. It might not be confined to a particular subgroup.
Many Breadcrumbs Appearing
“As we head into 2025, we should see increased activity across the commercial real estate space, as we are observing with REIT market trends,” said Sher Hafeez, senior managing director of JLL’s M&A and Corporate Advisory group. “There are a lot of breadcrumbs on display for a very active 2025 across both public and private real estate capital [markets. We] are excited about what’s ahead for our sector.”
As JLL noted, one area of emphasis for suitors could be the various residential real estate subgroups. REIT has some exposure to related stocks.
“Today’s living sector is the largest investable real estate property sector in the [U.S. It accounts] for approximately 40% of transaction volume in the last three [years. It] has broadened to include subsectors, such as affordable, student, seniors, manufactured housing communities and single-family rental. In addition, there is low correlation among the living [sector. This enables] investors to diversify their exposure and mitigate risk while being invested across the [spectrum. That boosts] the attractiveness of the sector,” concluded the research firm.
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