Real estate giant Blackstone has had inflows of $66 billion and invested $40 billion in the asset class over the last three years.
Against this backdrop of substantial fundraising and deployment, last week’s PERE America audience was given insight into the firm’s future deployment plans. On the New York conference stage, head of Americas Nadeem Meghji said Blackstone’s strategy in the region focuses on investments propelled by technology and urbanization.
For example, Meghji said that since the global financial crisis, Blackstone has snapped up 400 million square feet globally of industrial real estate with the thesis that consumers’ growing preference for e-commerce would lead to a boom in the sector. In the US, the firm is still buying industrial properties, particularly in last-mile infill locations and coastal markets.
Lab office space is also high on Blackstone’s investment menu. Last year, Blackstone privatized BioMed Realty Trust, which at the time had 16 million square feet of space in markets including Cambridge, Massachusetts; San Francisco; and San Diego. Blackstone continues to add onto the initial portfolio with acquisitions and developments in this property type.
“We saw that biotech companies were increasing their investments in drug discovery and they were moving out of places like New Jersey and Connecticut to places like Cambridge to be closer to talent and universities,” Meghji said. “Since closing on the BioMed transaction in January 2016, it’s produced more growth than anything else we own in the US.”
Geographically, urban west coast investments feature prominently, including multifamily and office in technology-driven Seattle, and office in Los Angeles, where supply has not kept pace with a booming entertainment industry led by companies such as Netflix and Hulu. Multifamily across the country remains attractive, as millennials delay marriage and choose to live close to or in cities. Within the sector, Blackstone is investing in B+ and A- apartments, such as its 2015 purchase of New York’s Stuyvesant Town and subsequent acquisition of nearby Kips Bay Court.
Meghji also touched on areas where Blackstone is more cautious. Suburban office, for example, is considered a loser as more companies relocate to urban centers, and triple-net-lease properties hold little appeal in a potentially rising interest rate environment, he said.
Regardless of property type, Blackstone’s guiding strategies feature a reliance on technology, both for investment decisions and operations. Meghji highlighted one company called Entic, in which Blackstone has a minority stake. Entic has been so successful in helping Blackstone to reduce energy in select properties that the latter company will roll out usage of the Entic technology throughout its portfolio.
“We’re basically generating a one-year payback across our portfolio because we know when the air conditioning is on too cold but nobody’s occupying the floor or when the lights are on and they don’t need to be,” he said.
The firm also has an investment in a company called VTS, a platform for communication between owners and tenants that also allows landlords to view various components of their portfolios. Blackstone is gleaning insights from that platform to make better future investments, Meghji said.
Blackstone managed $111.3 billion in real estate as of September 30, according to its third-quarter earnings.