Blackstone's Real Estate Spending Soars—Will a Selling Spree Follow in 2025?

Oct 31, 2024 • 15 min read

The world's largest commercial real estate owner, Blackstone Group, has significantly ramped up its property acquisitions this year, signaling confidence in a market recovery. After declaring a market bottom earlier this year, Blackstone has more than doubled its real estate spending, committing $22 billion toward acquisitions in the first nine months of 2024—more than twice the outlays for the same period in 2023. The firm has already allocated 40% of its flagship $30 billion real estate fund.

During the company's earnings call on Thursday, Blackstone President Jonathan Gray discussed the firm's aggressive investment strategy. When analysts inquired about when Blackstone might shift toward selling some of its $325 billion in real estate assets under management, CEO Stephen Schwarzman suggested that a balance between investing and harvesting could emerge next year.

"The balance this year has been very heavy toward investing relative to harvesting," Schwarzman said. "I think that will start to balance out, still probably more investing earlier on as we work through the year. I would then expect to see more realizations."

Schwarzman indicated that Blackstone will continue to focus on sectors like data centers, industrial real estate, and rental housing. He also hinted at potential opportunities in the office sector, a market from which Blackstone had previously distanced itself due to widespread challenges in the industry.

"I think we will find interesting places to deploy capital, and it's possible in office on a selective basis that you could find some interesting things, particularly higher-quality buildings, and even retail around the grocery-anchored space as opposed to the enclosed mall," Schwarzman added. "So I think we're in the middle of a broad-based recovery in real estate."

Blackstone's aggressive acquisition strategy comes amid a better-than-expected third-quarter performance. The firm's distributable earnings—a key measure of profitability—reached nearly $1.3 billion, approximately 10% above analyst projections. Assets under management grew from $1.08 trillion in Q2 to $1.11 trillion in Q3. Notably, Blackstone's credit unit surpassed real estate as the segment with the most assets under management, totaling $354.7 billion.

Looking ahead, Blackstone is preparing to take some of its largest holdings public, capitalizing on a stock market rally that has seen renewed investor interest. "We are preparing to take some portfolio companies public," Gray told the Financial Times. "When you have this strong of an equity market, it’s almost like a magnet pulling companies out of the private market."

Gray believes the surge in technology stocks indicates that investors are once again interested in initial public offerings. This sentiment could pave the way for Blackstone to realize gains from some of its investments through public listings.

Despite the recent buying spree, Blackstone has executed significant portfolio sales over the past year. These include the sale of budget motel chain Motel 6 to Oravel Stays for $525 million last month and the $725 million sale of the 450-room Turtle Bay Resort in Hawaii in May. The firm is also reportedly considering selling London-based events group Clarion Events for upwards of $2.6 billion.

One of the most scrutinized funds in Blackstone's portfolio is the Blackstone Real Estate Income Trust (BREIT), a semi-liquid vehicle from which investors have withdrawn $15 billion over the past few years. However, Schwarzman noted that repurchase requests are down 90% from their peak.

"BREIT is clearly moving toward positive net flows based on current trends," Schwarzman said. "We are seeing increased confidence among our investors."

As Blackstone continues to navigate the evolving real estate landscape, industry observers will be watching closely to see if the firm's increased investment activity will indeed lead to a selling phase in 2025. With a vast portfolio and a strategic eye on market opportunities, Blackstone remains a bellwether for the commercial real estate sector.