After nearly two years of substantial market disruption and change, real estate and construction executives feel the sector is on the verge of recovery, with many eyeing cross-border and cross-sector transactions in the year ahead.
Nearly three-quarters (78%) of REC executives in the 23rd EY Global Capital Confidence Barometer (pdf) survey are optimistic of revenue recovery in 2021 and 2022, with many expecting profitability to rebound in 2022. Recovery may be based, in part, on corporate strategy to move beyond borders and looking for cross-border and cross-sector synergies. Fifty-nine percent of those surveyed say they are interested in acquiring assets internationally, and 62% expect an increase in cross-sector M&A (further diversifying portfolios where risk is too concentrated in certain asset classes).
The pandemic hit the REC sector particularly hard. The real estate and construction sector intersects with nearly all aspects of the economy, including housing, offices and retailers. Prior to the pandemic, the industry was experiencing record-high valuations. When the pandemic began, deals nearly ground to a halt. Transaction data supports the survey results. According to Real Capital Analytics, the number of US transactions plummeted from a record high of more than 10,000 property sales in the fourth quarter of 2019 to an eight-year low of just 3,800 in the second quarter of 2020.