The U.S. REIT market has shifted dramatically as private capital seizes on valuation arbitrage. Since September, $3 billion in take-private deals have been announced, punctuated by high-profile acquisitions like Ares Management’s $2.1B bid for Plymouth Industrial and Rithm Capital’s $1.6B purchase of Paramount Group. These transactions, fueled by an improving debt market and large pools of institutional capital, are recalibrating price discovery for both public and private real estate assets. "The banks are back," notes Green Street’s advisory head—debt capital is accessible for quality portfolios, and buyers are moving swiftly.

Publicly traded REITs entered 2025 at steep 20–30% discounts to net asset value, especially in sectors like office and retail. This disconnect between public equity pricing and private-market valuations has opened an arbitrage window for well-capitalized buyers. Two recent billion-dollar acquisitions—Ares’s premium for Plymouth Industrial (226 assets) and Rithm’s buyout of Paramount Group—highlight the scale of demand for discounted portfolios. By contrast, smaller REITs such as Sotherly Hotels have agreed to go private at eye-popping premiums (153%), though their share prices had been severely depressed. Buyers are cherry-picking for quality, not scale.

A critical enabler of this M&A wave is the rebound in debt markets. The cost of acquisition financing has stabilized in the mid-5% range, and lenders have become more accommodating after a year of tight credit. Syndicate desks are preparing for deals possibly exceeding $10B, as banks and insurers compete to finance stabilized portfolios. For prime industrial and multifamily assets, leverage terms have improved—though lenders remain cautious on secondary office. The capital stack is now deep enough to support aggressive bids, provided underwriting is disciplined.

Private equity and sovereign funds have amassed billions in dry powder, waiting for market clarity. With public REITs still depressed, these investors are targeting assets with durable cash flow and clear upside. Major names—Blackstone, Brookfield—are reportedly circling data centers and manufactured housing portfolios. However, selection is highly disciplined: in office, only the top 10–20% of assets attract interest. This flight to quality has left lower-tier REITs languishing, underscoring that not all public-to-private plays will succeed.

Each privatization tightens the investable universe for both public and private CRE, setting new comps and drawing in fresh capital. Owners of similar assets to those acquired—like industrial warehouses—are now fielding higher interest as market sentiment improves. However, as more REITs go private, boards may adopt defensive tactics, and some M&A deals could stall due to shareholder resistance or financing snags. Ultimately, owners must weigh whether to sell into this momentum or hold for further price normalization.

If credit market conditions remain stable, more REIT privatizations could follow—especially in healthcare, storage, and residential. Yet, the trend is fragile: a widening of spreads or macro shock could chill activity. On the other hand, if rates ease further by mid-2026, a wave of deals could preempt a rebound in REIT prices, narrowing the arbitrage window. Boards may respond with poison pills or asset sales to set private-market comps and deter low-ball bids. In this environment, underwriting discipline and real-time debt sourcing remain paramount.