Blackstone sitting on $60 billion of real estate dry powder

With commercial real estate continuing to be something of a challenge anyone looking to tap LPs for funds at the moment is likely to get a fairly muted response. That doesn’t mean those that are already sitting on cash waiting to be deployed feel the same.

Blackstone has $1 trillion in assets under management (AUM) with its real estate portfolio representing around a third of this ($332 billion).

Speaking last week at the Goldman Sachs 2023 US Financial Services Conference , Jon Gray, chief operating officer at the firm, said a lot of the nervousness surrounded the office sector, which Gray said represented “a very small percentage of what we do.”

As with everyone Blackstone says its worth analysing. Below are some of the quotes from the interview.

On what happened with office

Gray: [It] happened because of the capex growth in that sector over time relative to the rental growth, we had no idea COVID was coming. But think that sector, the fundamentals remain challenged.

On what sectors are doing well

Gray: I think the positives are, many of the sectors do [have] … pretty good fundamentals. So our biggest sector by far is logistics. And last mile logistics, logistics overall, rents are still growing high single digits. Vacancy rates are low single digits. We continue to be hugely interested in the sector. It's more than 40 per cent of our portfolio. Areas like student housing, we're a big focus, again, fundamentals good rents growing high single digits, data centres, which we have in BREIT and our Core+ area, also in infrastructure, incredible demand in that space. And rents growing nicely.

On hotels

Gray: We have seen deceleration in multifamily and hotels, but nothing like what we had back in some of, I would say, the early '90s or … '08, '09 in terms of imbalances, vacancies, those sort of things. So the fundamentals with the exception of office are pretty good.

On what will happen to rates

Gray: [Rates] will come down. And I think the way it will work is when we settle at a level and the pricing has adjusted and the fundamentals start to look better, people will start to move into the sector.

On Blackstone’s dry power

Gray: Now for us, the good news is we have more than $60 billion of dry powder in real estate, and we're not going to wait for the all-clear sign. So we're going to start doing things in scale. We've been more active on a relative basis in Europe, where there's been more distress in real estate. But we think it's a very interesting time to deploy capital there.