As the commercial real estate market seeks to find its footing, City Office REIT, Inc. (NYSE: CIO) announced plans to be acquired by MCME Carell for $1.1B. The all-cash deal contemplates the sale of City Office’s Phoenix portfolio and is expected to close during Q4.
“After conducting an extensive process to explore potential strategic alternatives, we are pleased to have reached an agreement with MCME Carell,” according to City Offices CEO James Farrar. “In light of a challenging environment for the office sector, this Transaction delivers immediate and significant value to our shareholder.”
Source: Doorloop
The U.S. commercial real estate industry peaked at $1.35 trillion in 2019, before the covid-19 pandemic vastly altered the space. When the lockdowns closed offices, companies rapidly shifted toward remote work. While some companies have pushed for a full return to the office, many employees have continued to work from home. Even as the pandemic subsided in 2022, commercial real estate market declined by 6%.
Source: Market Data Forecast
Analysts, project growth ahead, however. As the chart above depicts, they anticipate a 3.44% compound annual growth rate over the next 8 years globally – with the U.S. market leading the rebound. “Urbanization continues to be a major driver of the commercial real estate market, with 55% of the global population living in urban areas as of 2023, projected to reach 68% by 2050,” according to Market Data Forecast. “Cities like Tokyo, New York, and London are witnessing continuous redevelopment projects to accommodate population growth with a focus on mixed-use developments that combine residential, commercial, and recreational spaces.”
North America, where City Office REIT is based, dominated the market as of last year, accounting for approximately 37% of global commercial real estate.
According to DealPulse’s M&A database, which harnesses both AI and attorneys to digest the granular deal points of publicly announced transactions, City Office REIT is advised by DLA Piper, while MCME Carell is advised by Gibson, Dunn & Crutcher LLP.
