Market sluggishness and aggressive expansion by big corporations in recent years have set the stage for potential acquisitions in 2025, according to Intel survey results and interviews.
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Amid commission lawsuits and NAR battles, major acquisitions and mergers have been quietly shaping the real estate landscape. Notable examples like Compass acquiring Latter & Blum and @properties Christie’s International Real Estate, as well as Howard Hanna merging with Home Experts Realty, raise questions about the future of such deals in 2025.
Will the trend of big acquisitions continue this year? Who will be the acquirers, and who will be acquired?
Was 2024 just the beginning of a consolidation story, or will it be further accelerated in 2025?
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To gain insights, Intel consulted industry experts and surveyed brokerage leaders in the latest Inman Intel Index survey.
The consensus suggests that a confluence of factors could make 2025 a significant year for mergers and acquisitions, indicating that 2024 may have been just a prelude to more consolidation.
However, not all players are expected to benefit from this trend. Established companies with a history of success during challenging times are likely to dominate the M&A landscape this year.
Most Brokerage Leaders Not Prioritizing M&A
In a recent survey, brokerage leaders were asked to rate the importance of mergers and acquisitions on a scale of one to five. Results showed that for many of the nearly 200 respondents, M&A is not a top priority.
- Approximately 47 percent of respondents ranked M&A as a one, indicating it is not a focus area. Another 12 percent rated it a two, suggesting low priority.
- Only 8 percent of respondents gave M&A a five, with an additional 12 percent rating it a four, indicating high priority.
- Similar responses were obtained when leaders were asked about M&A in the next 12 months, with 36 percent rating it as a one and 16 percent as a two. Only 11 percent anticipated high M&A activity.
Acquisitions Favored by Larger Companies
Despite the low prioritization by many brokerage leaders, experts predict significant M&A activity in 2025.
Chris Heller, President of OJO/movoto.com, anticipates a busy year for acquisitions, indicating that many companies are looking to expand.
While M&A may not be on every company’s agenda, it is a focal point for larger players in the industry.
Several factors were cited by experts to explain the expected uptick in M&A activity:
- Challenging market conditions have put pressure on smaller companies, prompting them to consider consolidation.
- Larger companies like Compass have demonstrated growth even in slow markets, motivating them to pursue acquisitions to further expand.
- Cloud-based companies are gaining traction, leading traditional brokerages to seek access to these models through M&A.
- Private equity firms, which have been accumulating cash reserves, are expected to drive many acquisitions in the near future.
“They are actively seeking opportunities and my phone won’t stop ringing.”
Kinney also mentioned that this year, capital markets may be more willing to invest in “strong companies,” allowing them to acquire weaker ones.
Brokers are primarily interested in making acquisitions rather than being acquired themselves. The majority of respondents expressed interest in acquiring competitors in their market or expanding into new markets through acquisitions. Only a small percentage indicated openness to selling their firm.
The current market pressures are leading to acquisitions of companies that are struggling to adapt to the changing landscape. Companies that fail to evolve and increase their value to agents are likely targets for acquisition. However, some of the most significant deals may involve thriving companies looking to leverage the benefits of joining forces with a larger organization.
In the proptech sector, many startups are facing financial challenges due to the market conditions. This may lead to a wave of mergers and acquisitions as companies look to survive or cut losses. Proptech firms may become the focal point of real estate M&A activity in 2025.
Overall, the real estate industry is poised for significant consolidation and restructuring through mergers and acquisitions, with both struggling and successful companies being targeted for various reasons. The monthly survey is conducted regularly. Contact Jim Dalrymple II via email.