Real estate co-head reveals how well-capitalized investors can benefit from the downturn
Well-capitalized investors are finding opportunities amid the ongoing turbulence in the commercial real estate sector, according to Kathleen McCarthy, co-head of global real estate at Blackstone.
“When sentiment gets really negative, prices decouple from fundamental value,” McCarthy said in a Bloomberg Television interview. “We have a practice of trying to quieten that noise and look at the information in front of us.”
In an interview with Bloomberg Television, McCarthy acknowledged the high vacancy rates in US office markets and the impact of rising interest rates on property values in Europe, which have triggered a significant selloff in publicly traded real estate stocks and bonds. While investors anticipate price collapses, a standoff between buyers and sellers has delayed the full impact on asset values.
Read more: What’s to blame for the office market’s descent?
Blackstone, a leading global investment firm, has already invested roughly €3.5 billion ($3.8 billion) in Europe this year, according to Bloomberg. McCarthy explained that its focus lies on properties with strong potential for rental growth to offset higher borrowing costs. Sectors such as warehouses, student housing, and lab space are particularly attractive to Blackstone.
With access to extensive data, McCarthy emphasized that Blackstone’s transactions are driven by informed decision-making.
“We have more data than any other investor on the planet,” McCarthy said. “That informs where we transact.” While the company remains selective, she said Blackstone is prepared to capitalize on short-term and long-term strengths in the market.
In the German commercial real estate market, the volume of deals in the first half of the year fell to about two-thirds below the long-term average. However, pressure is mounting on landlords who need to sell assets to reduce their growing debt burden resulting from declining asset values.
“It takes a period of time for sellers to recognize that it is maybe time to move on or settle into new pricing,” McCarthy said.
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