Real estate reportedly is poised to be one of the hottest sectors for mergers and acquisitions growth in the coming year, even if the Federal Reserve finally begins raising interest rates.

“Due diligence activity in real estate during the first half of 2015 was up 57%, according to Intralinks’ Deal Flow Predictor which forecasts M&A activity six months into the future, the largest increase for any industry, Forbes reports.

“This may be surprising because investors have been anticipating rising interest rates, which ultimately should act as a brake on such a finance-dependent industry. But so far this year, real estate M&A is on a roll. Announced deals in North America were up 37% during the first half of the year compared to the year-ago period, while deal value was up 94%,” Forbes reported.

“Prices for property, both commercial and residential, have come bouncing back, fueling excitement in the sector. An expanding economy continues pushing rents higher.

Occupancy rates are strong, and a key metric for real estate owners, same property net-operating income, is healthy,” Forbes reported.

Meanwhile, private-equity firms have made big real estate purchases, and are also investing in commercial real estate brokers. Activist investors are also gaining a foothold in the sector, Forbes reported.

Earlier this month, Blackstone Group LP, the world’s biggest alternative-asset manager, gathered $15.8 billion for the largest fund to invest in global real estate.

The firm collected more than 90 percent of the pool, its eighth fund for global property, from institutions in about four months, a person with knowledge of the matter recently told Bloomberg. The remainder was raised from individual investors, a process that takes longer to complete because of the paperwork involved, the person said.

Blackstone has already committed 20 percent of the fund to deals, according to a statement. The New York-based firm in April agreed to a $14 billion transaction to buy real estate assets being divested by General Electric Co., and last month agreed to buy Strategic Hotels & Resorts Inc., the manager of properties including Manhattan’s Essex House and the Ritz- Carlton Half Moon Bay, for about $3.9 billion.

Blackstone has built the largest real estate investing business, overseeing $92 billion in assets as of June 30. Its seven previous global property funds have doubled their invested capital, with annualized returns of 18 percent after fees since 1994, according to the firm’s most recent earnings statement.

The real estate group is led by Jon Gray, 45, considered a possible successor to Chief Executive Officer Steve Schwarzman. Gray’s group also manages an $8.2 billion fund investing in European property and a $5 billion pool for deals in Asia.
 
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