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  • Writer's pictureRealFacts Editorial Team

Blackstone Really Likes This Asset Class

Blackstone sign

As the commercial real estate (CRE) landscape shows early signs of recovery, Blackstone, one of the world’s largest investment firms, is poised to capitalize on emerging opportunities. The firm’s executives have been vocal about their optimistic outlook on the CRE market, suggesting that a strategic deployment of capital during this period could yield significant returns. At the Bernstein Strategic Decisions Conference, Blackstone’s Chief Operating Officer Jonathan Gray provided insights into the firm’s market perspective and strategic initiatives.

Commercial Real Estate: Navigating the Bottoming Market

Jonathan Gray, in his address, highlighted that the commercial real estate market is beginning to bottom out, an observation based on increasing market activity. “Now, I'm not saying this is some sort of sharp V-shaped recovery, but as you get to this bottoming period, what you want to do is try to deploy capital into this,” Gray noted, according to a transcript from S&P Global Market Intelligence. This cautious optimism is rooted in the dynamics of supply and cost of capital, both of which are trending favorably. The reduction in new supply has been substantial, and the cost of capital is starting to decrease, setting the stage for potential recovery.

Gray acknowledged the cyclical nature of the market, predicting continued negativity in sentiment for some time. However, he emphasized Blackstone’s readiness to leverage its substantial resources. “We’ve got $64 billion of dry powder to deploy in real estate,” Gray stated, underscoring the firm’s preparedness to seize opportunities as the market stabilizes.

A Diversified Portfolio: The Key to Outperformance

Blackstone’s strategic portfolio composition has been a significant factor in its market outperformance. Notably, less than 2% of Blackstone’s exposure is in the U.S. office sector, a segment currently facing substantial challenges. Instead, the firm’s largest investments are in logistics, which Gray identified as the best-performing sector. Additionally, Blackstone has significant holdings in rental housing, particularly student housing, both of which have demonstrated resilience and growth potential.

The Rising Star: Data Centers

While logistics and rental housing are cornerstones of Blackstone’s portfolio, another asset class is rapidly gaining prominence: data centers. This enthusiasm was echoed by Nadeem Meghji, global co-head at Blackstone Real Estate, in a recent interview with CNBC. Meghji identified data centers as the most exciting asset class across the firm, driven primarily by the surging demand for artificial intelligence (AI) infrastructure. “It is driving demand like we’ve never seen before,” Meghji remarked, highlighting an 11-fold increase in demand over the past five years.

Blackstone’s strategic position in the data center market is exemplified by its ownership of QTS Data Centers, the fastest-growing data center company globally. This asset class is not only the fastest-growing component of Blackstone’s non-traded BREIT but also a critical pillar in the firm’s broader growth strategy.


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