Real Estate M&A: Analyzing the shifting market dynamics and future projections for the retail sector

The global real estate market is undergoing a period of significant recalibration, characterized by reduced transaction volumes and structural adjustments. This is particularly true within the retail and office segments, according to our 2025 Real Estate M&A Outlook Report. 

Elevated interest rates and economic volatility have fostered a cautious stance among investors and real estate fund managers. However, according to Ansarada Deal Room data, there are emerging indications that suggest a potential revitalization of the market in 2025.

“Retail looks very appealing again. Population growth forecasts are strong, and population is a key driver for Real Estate performance across all asset classes – retail is no different. Despite stubborn inflation, I think retail sales will grow throughout 2025, and against a backdrop of limited supply, I can see retail transacting well,” says Sachin Dave, Head of Analytics at 151 Property.

Challenges and emerging opportunities

A notable reduction in activity within the retail and office property sectors is evident, primarily attributable to cyclical economic factors and high interest rates. Conversely, sectors such as commercial residential, industrial, and alternative real estate are demonstrating relative stability.

Analysts anticipate an improvement in property market conditions in 2025, driven by evolving economic variables and shifting investor sentiment.

Astrid Beemster, Partner at Norton Rose Full Bright notes, “Certain asset classes have transacted with much higher activity – in particular, retail property has proved to be a very resilient and active sector, and industrial continues to be stable. 

“Our clients are increasingly expressing interest in alternative asset classes, in particular in the living sector – purpose-built student accommodation, build to rent and co-living. Given that global activity has been more subdued than here in Australia, global allocators are still looking to Australia for investments.”

Regional analysis

Australia and New Zealand's distinct trajectory

The Australian commercial property market presents an interesting divergence from global trends. Despite a 2% decline in activity according to Ansarada Deal Room data, overall transaction volumes have increased year-over-year. This discrepancy suggests a rise in off-market transactions, a trend supported by observed reductions in formal retail sector campaigns over the past 12 months.

Within the retail shopping center segment in Australia and New Zealand, there has been a substantial increase in bidder participation, with a 60% rise in the second half of 2024 compared to the preceding 12 months. This surge in capital deployment indicates a renewed investor interest in retail properties within the region.

Belgium's market adjustment

Similarly, the Belgian retail real estate sector is experiencing a gradual recovery. Post-pandemic, the market has undergone necessary price corrections for investment properties and rental rate adjustments, particularly in high-street locations. Out-of-town retail locations have shown greater stability.

Key drivers influencing retail M&A

Several factors are contributing to the renewed interest in retail property acquisitions:

• Performance of prime CBD office assets: Premium and A-grade central business district office properties are demonstrating robust performance, supported by increased return-to-office mandates and strategic leasing opportunities for fringe CBD tenants. This positive momentum is anticipated to extend into the retail sector.

• Demographic growth: Strong population growth forecasts are pivotal drivers of real estate performance across all asset classes, including retail. This demographic expansion creates sustained demand for retail goods and services.

• Retail sales resilience: Despite persistent inflationary pressures, forecasts indicate continued growth in retail sales throughout 2025. This, coupled with limited supply in desirable retail locations, is expected to stimulate transactional activity.

• Sector stability: Retail property has demonstrated consistent resilience and adaptability, while the industrial sector maintains its stability and appeal to investors.

Future outlook

Looking forward, the future of Real Estate M&A in the retail space hinges on a strategic and adaptable approach. Successful investors will prioritize rigorous due diligence, particularly in assessing the long-term viability of assets amidst shifting consumer behaviors and technological advancements. Opportunities for asset repositioning, focusing on enhanced tenant mixes and experiential retail environments, will be crucial. 

Data-driven decision-making, leveraging advanced analytics to understand market trends and consumer demographics, will provide a competitive edge. Moreover, assets anchored by essential retail services, such as grocery and healthcare, will continue to demonstrate robust performance. 

Finally, retailers with seamless omnichannel integration, bridging online and offline sales platforms, will prove increasingly attractive to discerning investors, shaping the landscape of future retail transactions.