REITs are continuing to undertake strategic merger and acquisition (M&A) activity, yet there is a clear shift in the tenor of deals getting done in the current challenging environment, according to analysts and legal experts. Commercial real estate transaction volume is down across the board, M&A deals included. The $63.9 billion in 2023 year-to-date REIT M&A activity is below the robust pace of deal-making recorded in the prior two years that reached $83.0 billion in 2022 and $99.4 billion in 2021, according to Nareit data. Several of the deals announced in the 2022-2023 period involved the acquisition of a relatively small high-quality portfolio of assets by a larger strategic consolidator. “The larger you are, the lower your cost of capital, and for REITs, it's all a capital game. The cost of capital is everything,” says Yoel Kranz, co-chair of REITs & Real Estate M&A, to REIT.